Question

Differentiate between Central bank and commercial bank.

Answer 1

Following are the points of difference between central bank and commercial bank:

1. The Central bank is an apex bank which means the banker all the banks in the country.
   A Commercial bank functions under the control of the central bank.
2. The Central bank accepts deposits and advances loans to the commercial banks.
   A Commercial bank accepts deposits and advances loans to the general public.
3. The Central bank regulates the supply of money.
   A Commercial bank only contributes to the supply of money.
4. The Central bank is a custodian of forex reserve of the country.
   A Commercial bank is not a custodian of forex reserve of the country.
5. The Central bank is a note-issuing authority
   A Commercial bank is not a note-issuing authority.
6. The Central bank focuses on growth and stability of the economy.
   A commercial bank focuses on profit maximisation.