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Differences between central bank and commercial banks

Central Bank Commercial Bank
1. Central bank is the apex institution of Commercial banks are supportive
monetary system in a country. institutions and are part of monetary
system.
2. There is only one central bank in a There may be number of commercial
country. banks as per the size of economy of
the country.
3. Central bank is government owned Commercial banks can be
bank. government, semi-government and
private as well.
4. Central bank is only one authority to Commercial banks do not have
issue note. right to issue note.
5. Central bank controls the credit as per Commercial banks only create the
the need of the economy. credit.

6. Central bank is non-profit institution. Commercial banks are established
to earn profit.
7. Central bank is bank of the banks. Commercial banks are banks of
general public.

C. Development Bank

Some of the banks are established for special purpose rather than mere profit motive.
The bank which is established with view to assist in the development of special sector
like agriculture, industry, infrastructure, mines, communication, hydroelectricity
etc is called development bank. It provides the capital, technical and administrative
assistance for the development of such sectors. These banks are established to
recognize and develop the sectors where huge investment capital as well as technical
support is needed. Nepal Industrial Development Bank, Agriculture Development
Bank, Rural Development Bank are the examples of development banks in Nepal.
As per the Bank and Financial Institutions Act 2063, banks and financial institutions
are classified into four groups namely A, B, C and D. Development banks are classified
as ‘Grade B’ except Agriculture Development Bank which falls under ‘Grade A’. In the
history of development bank, Society General De Beljique established in Belgium in
1822 AD is the first development bank of Europe and the oldest development bank
in the world. Its objective was to provide financial support to the industrial sector of
the country.

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