Difference between commercial bank and development bank pdf

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difference between commercial bank and development bank pdf

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The word Bank has been originated from many words. It means heap of money.

Development Banks | Meaning | Objectives | Commercial vs Development Banks

Development banks are those which have been set up mainly to provide infrastructure facilities for the industrial growth of the country. They provide financial assistance for both public and private sector industries. Working capital requirements are provided by commercial banks, indigenous bankers, co-operative banks, money lenders, etc. The money market provides short-term funds which mean working capital requirements. The long term requirements of business concerns are provided by industrial banks, and the various long term lending institutions which are created by government. In India these long term lending institutions are collectively referred as development banks.

A bank is a financial institution whose aim is to provide financial services. They largely contribute to economic development through financial intermediation, money creation, and asset transformation. They also represent the largest source of financing for businesses by providing financing directly, extending loans and buying bonds and providing financing for consumers. On this basis, banks are either classified into private and public banks. While a private bank is owned by one or more individuals, a public bank, which is also referred to as an incorporated bank is incorporated under an act and are owned by shareholders. Since banks carry out different functions, they are classified based on their roles. These include; commercial banks, development banks, industrial banks, agricultural banks, exchange banks, savings banks, and central banks.

Development banks include multibillion-dollar entities like the World Bank, but most are smaller regional and local lenders spread throughout the world. They exist to fund projects that improve the material well-being of people, particularly those living in poverty. A development bank, in short, does what most commercial banks cannot do: it funnels capital into projects of dubious profitability. To achieve these ends, most development banks—and there are perhaps hundreds in the United States alone—are geared toward grassroots economic assistance. The two types have little in common from an organizational point of view, but they share the common goal of combating poverty and economic hardship by infusing capital into local economies.

Commercial bank

A central bank is a banker's bank. It is normally part of or connected to the government of a country and manages the country's financial system. A commercial bank provides banking services to businesses, institutions and some individuals. The money it takes in from its customers is deposited at its local central bank. Nearly all the country's banks have accounts at the central bank to keep their money and for borrowing to offset any temporary shortages of cash. Both commercial banks and central banks take in deposits of money. A difference between a central bank and a commercial bank is that commercial banks receive their deposits, in the form of checking, savings and certificates of deposit, from their corporate or individual customers and deposit some of that money at their country's central bank.

Difference between Commercial Bank and Development Bank | Meaning and Difference | List 2020 - 21

A development finance institution DFI also known as a development bank or development finance company DFC is a financial institution that provides risk capital for economic development projects on non commercial basis. DFIs can play a crucial role in financing private and public sector investments in developing countries, in the form of higher risk loans, equity positions, and guarantees. DFIs often provide finance to the private sector for investments that promote development and to help companies to invest, especially in countries with various restrictions on the market.

Development Banks | Meaning | Objectives | Commercial vs Development Banks

A commercial bank is a financial institution which accepts deposits from the public and gives loans for the purposes of consumption and investment to make profit. Commercial banks include private sector banks and public sector banks. In the United States, the term commercial bank was often used to distinguish it from an investment bank due to differences in bank regulation.


Commercial Bank is the bank organized to perform public utility banking services, such as accepting deposits, lending money, etc. On the other hand, development bank refers to a multi-purpose financial undertaking set up to provide financial aid to the industrial and agricultural sector, to encourage development. Banks play a very important role in the financial system of every country. If the banking system in the economy is effective, it adds to the economic development of the country.

The primary function of a bank is to support the economic system by acting as a mediator between depositors and loan seekers. Banking services are essential for the development of a country, functioning as the back-bone to economies. These can be differentiated on the basis of the purpose they serve in an economic system. The difference between a Commercial Bank and a Development Bank is that a Commercial Bank functions to provide financial services to industries and individuals, whereas a Development Bank is set up to provide funds for infrastructural and economic development. A commercial bank is an institution where most people seek financial services. As a financial institution, it offers accounting services, deposits, loans and other banking products like certificates for deposits.

Development banks are specialised multi - purpose institutions. Commercial banks accept deposits from the public through different types of accounts. Commercial banks mainly provide short and medium term loans. Development banks provide medium and long-term loans.

Difference Between Commercial Bank and Development Bank

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