INTRODUCTION

Central Bank: financial organisation that has exclusive authority over the creation and disbursement of credit and money for an economy or group of economies and the function of formulating monetary policy. Eg.: Reserve Bank of India, Federal Reserve of USA etc.

Commercial Bank: financial organisation that handles all public deposit and withdrawal activities, as well as lending for investments and other similar purposes. Eg.: State Bank of India, HDFC Bank etc.

DIFFERENCE BETWEEN CENTRAL BANK AND COMMERCIAL BANKS

Issuing Currency

• Central Bank: sole authority to issue currency
• Commercial Bank: no role in issuing of currency

Monetary Policy

• Central Bank: formulates monetary policy
• Commercial Bank: doesn’t formulate, only implements what has been formulated 

Regulation and supervision

• Central Bank: role of regulating and supervising the functioning of commercial banks
• Commercial Bank: subject to the regulation of central bank

Deposits, loans and transactions

• Central Bank: works as banker for the central and state governments
• Commercial Bank: works as banker for individuals and businesses

Aim 

• Central Bank: aims to maintain financial stability of the economy
• Commercial Bank: aims to increase its own profit 

CONCLUSION

Central bank and commercial banks form the basic structure of the banking system in the country.