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Objective of a central bank

A central bank has three major objectives:
  • Monetary stability including stability of domestic price levels
  • Maintenance of the international value of the nation’s currency
  • Issue of currency

Basis of difference

Central bank

Commercial bank

Profit motive

The central bank is not a profit seeking institution though it may earn huge profits

Commercial banks are profit seeking institutions



Revenues are mainly through dealings in Government securities, interest on loans granted to state Governments and other financial institutions including commercial banks

Commercial banks are profit seeking institutions


Apex institution

Central bank is an apex institution in the money market

It is merely a unit in the banking structure of the country operating under the control of a central bank



These banks are governed and owned by the Government

These banks may be owned by the Government or private entrepreneurs


Dealings with Public

It deals with Governments, central and state banks and other financial institutions

Commercial banks deal with the general public

Credit creation and control

Central bank controls credit

Commercial banks create credit

Issue of currency

Central bank has the power to issue currency

Commercial banks are not allowed to issue currency

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