MONEY AND BANKING PART 23
IMPORTANCE OF COMMERCIAL BANKS Commercial banks play a important role in the economy to the extent that the industrial sector cannot function without it. According to Wick-sell, "Bank is the heart and central point of modern exchange economy They help the economy to run efficiently and smoothly. They are important for the consumers, producers, investors as well as the governing body of the country.
The importance of a commercial bank is highlighted in the following points: 1. They help in the promotion of saving. 2. They accelerate the growth rate of the economy. 3. They promote regional balance by opening up branches all over the country.
4. They are a source of credit for many sectors. S. It enables entrepreneurs to innovate and invest which accelerates the process of economic development. 6. The more loans and advances than the cash position of the depositor's permits.. y create credit in the sense that they are able to give 7. They help commerce and industry to expand their field of operation
8. They promote large-scale production and growth of priority sectors such as agriculture, small-scale industry, retail trade and export. 9. They help the customers by providing a range of customer oriented services. 10. They help in the optimum utilisation of resources.
DIFFERENCE The difference between a central bank and a commercial bank is mentioned below: MEANING : A central bank is the main central body of monetary concerns. It is the banker of all banks. Commercial banks operates under the central bank. It is an individual unit. 1. 2. AIM: The aim of central bank is social welfare but commercial bank's aim is profit maximisation.
DIFFERENCE 3. CONTROL ON MONEY SUPPLY : Central bank controls the credit flow in the economy but commercial banks create credit within the economy. 4.FUNCTION: The function of a central bank is that it is banker to the government. The function of a commercial bank is that it is the banker to the common public. 5.CURRENCY ISSUE: Central bank has the authority to issue currency but a commercial bank does not have any such power.