Central Bank vs. Commercial Bank — What's the Difference?
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5e4ef.webp)
By Tayyaba Rehman — Published on October 17, 2023
A Central Bank is a nation's primary monetary authority controlling monetary policy, while a Commercial Bank offers financial services to the public and businesses.
![](webp/central-bank-vs-commercial-bank-143140.webp)
Difference Between Central Bank and Commercial Bank
Table of Contents
ADVERTISEMENT
Key Differences
Central Bank actions like adjusting interest rates or engaging in open market operations have broad impacts on a country's economy. In contrast, a Commercial Bank operates within the parameters set by the Central Bank, focusing on customer-specific services and transactions.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
The Central Bank, being a nation's chief financial institution, often holds reserves and implements policy to stabilize or stimulate economic growth. On the other hand, a Commercial Bank's primary focus is to earn profit by lending money at higher interest rates than they pay for deposits.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
A Central Bank is an institution responsible for a country's monetary policy, including issuing currency and regulating money supply. Conversely, a Commercial Bank is a financial entity that offers a variety of services such as accepting deposits, granting loans, and more to individuals and businesses.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
The Central Bank is typically a government-owned or -controlled entity, ensuring economic stability and steering fiscal strategy. A Commercial Bank, however, usually operates as a for-profit business, serving customers and shareholders alike.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Central Banks play an essential role in setting the direction for a nation's financial health, laying the foundation for economic policies. Meanwhile, Commercial Banks play their part by facilitating daily transactions, providing credit, and supporting economic activity at the grassroots level.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
ADVERTISEMENT
Comparison Chart
Primary Role
Governs monetary policy of a country
Provides financial services to the public
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Ownership
Often government-owned or -controlled
Typically for-profit and privately owned
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Function
Regulates money supply, issues currency
Accepts deposits, grants loans
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Economic Impact
Shapes macroeconomic policies
Facilitates daily transactions, supports economy
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Customer Base
Not customer-facing; interacts with commercial banks
Serves individuals, businesses, and corporations
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
ADVERTISEMENT
Definitions
Central Bank
A nation's chief financial institution overseeing monetary policy.
The Federal Reserve is the Central Bank of the United States.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
Commercial Bank
A financial institution offering banking services to the public.
I opened a savings account at my local Commercial Bank.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
Central Bank
Governs the financial system ensuring economic stability.
The Central Bank lowered interest rates to stimulate economic growth.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
Commercial Bank
Provides essential financial infrastructure for an economy.
The Commercial Bank's new branch will facilitate trade in the region.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
Central Bank
Typically non-profit, focusing on national economic objectives.
The Central Bank's decisions prioritize the country's economic health over profits.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
Commercial Bank
Operates to earn profits from financial activities.
The Commercial Bank announced impressive quarterly profits.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
Central Bank
Responsible for issuing and regulating a country's currency.
The Central Bank decided to print more money to combat deflation.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
Commercial Bank
Grants loans, accepts deposits, and provides related services.
The Commercial Bank approved my mortgage application.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
Central Bank
Sets the regulatory framework within which other banks operate.
New guidelines were released by the Central Bank to ensure fiscal safety.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
Commercial Bank
Works within regulations set by the country's Central Bank.
The Commercial Bank adjusted its loan rates according to Central Bank guidelines.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 04, 2023
FAQs
Who owns the Central Bank?
Central Banks are often government-owned or -controlled entities.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
How does a Commercial Bank make money?
Commercial Banks earn profits by charging higher interest on loans than they pay on deposits.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
What is a Central Bank?
A Central Bank is a country's primary financial institution responsible for monetary policy and currency regulation.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
How does a Commercial Bank differ from a Central Bank?
A Commercial Bank provides financial services to individuals and businesses, while a Central Bank governs a nation's monetary policy.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Can I open an account at a Central Bank?
Typically, no. Central Banks are not customer-facing, while Commercial Banks offer such services.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Can a Central Bank go bankrupt?
While theoretically possible, in practice, Central Banks have measures and backing to prevent such scenarios.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Why is the Central Bank important for an economy?
Central Banks ensure economic stability, control inflation, and implement monetary policies to support growth.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
What services can I expect from a Commercial Bank?
Commercial Banks offer services like savings and checking accounts, loans, credit cards, and more.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Why do Central Banks hold foreign reserves?
Central Banks hold foreign reserves to stabilize or influence their currency's value and ensure economic stability.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Can a Commercial Bank print money?
No, only the Central Bank has the authority to issue (or print) the national currency.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
How many Commercial Banks can a country have?
There's no set limit; a country can have multiple Commercial Banks based on market dynamics and regulatory approvals.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Does a Central Bank provide loans to individuals?
No, Central Banks don't deal with individuals for such services; that's the role of Commercial Banks.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Who regulates Commercial Banks?
Commercial Banks are regulated by the country's Central Bank and other financial regulatory bodies.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
How does a Central Bank combat inflation?
Central Banks can use tools like raising interest rates or selling government bonds to reduce money supply and combat inflation.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Do Commercial Banks need approval from the Central Bank to operate?
Yes, Commercial Banks operate under a license and regulatory framework set by the Central Bank.
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed5c3b8.webp)
Tayyaba Rehman
Oct 17, 2023
Author Spotlight
![](webp/e71d67b1aba47c9e5bd8eb22e21c1ed55332.webp)
Written by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.