Tuesday, April 12, 2016

Difference between Commercial Bank and Development Bank

Differences between Commercial Bank and Development Bank

Basis
Commercial Bank
Development Bank
1. Formation
Commercial banks are generally set up as companies under the Companies Act.
Development banks are usually set up under the special Act passed by the Government.
2. Nature
Commercial banks are ordinary financial institution.
Development banks are specialised multi - purpose institutions.
3. Raising of Funds
Commercial banks accept deposits from the public through different types of accounts. These deposits are repayable on demand.
Development banks do not accept deposits like commercial banks. Their main sources of funds are borrowing, grants, selling securities etc.
4.Cheque facility
There is cheque facility in case of commercial banks. Demand deposits are withdrawn by cheques.
There is so such cheque facility in case of development banks.
5. Advance
Commercial banks mainly provide short and medium term loans.
Development banks provide medium and long-term loans.
6. Motive
The basic motives of commercial banks are to maximise the profits.
Development banks are motivated by social profit i.e. it aims at providing service.
7. Credit creation
Commercial banks can create credit or multiple deposits while lending. 
Development banks can’t create credit.
8. Acceptance of liabilities 
The commercial bank’s liabilities are accepted as means to settle transactions.
The liabilities of development banks are not accepted as a means to settle transaction.