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Commercial Applications

Differentiate between central bank and commercial bank.

Banking

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Differences between Central Bank and Commercial Bank

S.No.Basis of DistinctionCentral BankCommercial Bank
1.Position or statusIt is the apex institution of a country's banking system.It is one of the banks in a country.
2.OwnershipIt is owned by the Government.It is generally owned by the shareholders.
3.AimIts aim is to serve the country's interest.Its aim is to earn profit.
4.NumberThere is only one central bank in a country.There are several commercial banks in a country.
5.Main clientIt is a banker to the Government.It is a banker to the general public.
6.Issue of notesIt has the monopoly over issue of notes.It cannot issue notes.
7.Relationship with other banksIt controls all other banks.It functions under the control of the central bank.
8.CompetitionIt does not compete with commercial banks.It competes with other commercial banks.
9.Public dealingsIt does not deal with the public directly.It deals with the public directly.
10.Foreign exchangeIt is the custodian of foreign exchange reserves of the country.It is only an authorised dealer in foreign exchange.
11.Lender of last resortIt serves as a banker to other banks by keeping their reserves.It does not serve as a banker to other banks.
12.Credit controlIt controls credit in the country.It creates credit for customers.
13.Chief executiveIts chief executive is called 'Governor'.Its chief executive is called 'Chairman'.

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