| Definition |
The primary monetary authority of a country responsible for regulating the money supply and financial system. |
Financial institutions that provide banking services like accepting deposits and lending to individuals and businesses. |
| Ownership |
Usually owned by the government or acts as a government entity. |
Privately owned or publicly listed companies. |
| Main Function |
Control monetary policy, issue currency, regulate banks, manage reserves. |
Provide loans, accept deposits, offer payment and investment services. |
| Monetary Authority |
Acts as the monetary authority for the country. |
Operate under regulations set by the central bank. |
| Currency Issuance |
Has the sole right to issue the national currency. |
Cannot issue currency; operate using currency issued by the central bank. |
| Regulation |
Regulates and supervises commercial banks and financial institutions. |
Subject to regulation and supervision by the central bank and other authorities. |
| Role in Economy |
Ensures financial stability, controls inflation, manages interest rates. |
Facilitates economic activity by providing credit and liquidity to consumers and businesses. |
| Customer Base |
Primarily serves the government and commercial banks. |
Serves individuals, businesses, and government entities. |
| Sources of Funds |
Government funds, foreign reserves, and monetary tools like open market operations. |
Customer deposits, borrowings, and equity. |
| Profit Motive |
Not profit-driven; focuses on economic stability. |
Profit-oriented; aims to maximize shareholder value. |
| Examples |
Reserve Bank of India (RBI), Federal Reserve (USA), European Central Bank. |
State Bank of India (SBI), JPMorgan Chase, HDFC Bank. |
| Interest Rates |
Sets benchmark interest rates affecting the entire economy. |
Offers deposit and loan interest rates to customers, influenced by central bank rates. |
| Risk Bearing |
Absorbs systemic risks and acts as lender of last resort. |
Bears credit and operational risks associated with lending and deposits. |
| Services Offered |
Monetary policy implementation, currency management, government banking. |
Deposits, loans, credit cards, wealth management, payment processing. |
| Liquidity Management |
Manages liquidity in the banking system via tools like repo rates, cash reserve ratio. |
Manages liquidity to meet customer withdrawal demands and loan disbursements. |
| Legal Status |
Supreme monetary institution with sovereign powers. |
Regular commercial entities operating under banking laws. |
Central Bank vs Commercial Bank