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Difference between a Central Bank & Commercial Bank

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Sr. Points Central Bank Commercial Bank
1 Ownership Government has the ownership of Central Bank. Commercial Banks are controlled privately. However in Pakistan some banks were nationalized in 1974.
2 Management The management & employees are appointed by the Government. The management and other employees are appointed by the board of directors.
3 Deposits Central bank cannot receive the deposit of the public Commercial banks can receive the deposit of the public.
4 Loans The central bank provides the loan to the government and commercial banks. Commercial banks provide the loans to the customer.
5 Aim Economic development is the aim of the central bank. Earning profit is the primary aim of the commercial bank.
6 No. of Banks There is only one central bank for every country Every country has many commercial banks
7 Foreign Branches Central bank has no branch in foreign country Commercial banks may have branches in foreign country.
8 Account holder The government and commercial banks are the account holders of central bank The individuals, partnership, limited companies are the account holders.
9 Advisor The central bank advises the government on financial matters The commercial banks advise their customers for investment, business consultancy etc.
10 Note issue Central bank has the sole right of note issue Commercial bank cannot issue the notes.
11 Exchange control Exchange control is the responsibility of the central bank Exchange control is not the responsibility of commercial bank.
12 Control of credit Central bank has the authority on control of credit Commercial bank has no authority on control of credit
13 Control & growth of Banking It is the duty of the central bank to control the growth of banking Control and growth of banking is not the responsibility of the commercial bank.
14 Foreign payment The central bank makes the foreign payment on behalf of the government Commercial banks makes the payments on behalf of the customers.
15 Metallic reserves Central bank keeps the metallic reserves like gold Commercial banks do not keep the metallic reserves.
16 Transfer money It transfer money from one place to another for the government and banks. It transfer money from one place to another for the people.
17 Evening banking Evening services are not provided by the central bank Commercial banks provide evening banking services.
18 Wind up The central bank cannot be closed up even if working at loss Commercial banks hold reserve with central bank. So that it could help them in difficulties.
19 Lender last resort Central bank acts as a lender of last resort for commercial bank Commercial banks hold reserves with central bank, so that it could help them in difficulties.
20 Governing act Usually the laws governing central bank are difficult from that which governs commercial banks. In Pakistan SBP is governing by SBP Act 1956 Commercial banks are governed by different laws. In Pakistancommercial banks work under companies Ordinance 1984.

 

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