Notes 
             Class-12                                                    Sub-Economics 
             Chapter-2 
                                          Money and Banking 
              
             Central Bank- 
                  Central bank is an ‘Apex’ body that controls,operates,regulates and direct 
                   the entire banking and monetary (related to money) structure of the country. 
                  It is known as the apex (supreme) body because it occupies the top most 
                   position in the monetary and banking system of the country. 
                  All the financially developed countries have their own central bank. 
                  India’s central bank is the Reserve Bank of India (RBI).It was established in 
                   April 1,1935 under Reserve Bank of India act,1934. 
                  Cental Bank is known by different name in different countries.In India it is 
                   RBI,in UK as Bank of England and in USA it is known as Federal Reserve 
                   System. 
              
             Commercial Bank- 
                  Commercial bank is an institution which performs the function of accepting 
                   deposits,granting  loans  and  making  investments  with  the  aim  of  earning 
                   profit. 
                  State Bank of India,Punjab National Bank,Allahabad Bank,Canara Bank are 
                   some of the commercial bank of India. 
                  A  financial  institution  can  become  a  bank  only  when  it  performs  two 
                   function i.e 
                             Accepting deposit from public 
                            Lending loan to the public 
                  If  a  finance  institution  performs  only  one  function  i.e  accepting  only 
                   deposits it will not be called a bank. 
                     For example post office savings accepts deposit from the public but they do 
                      not lend money to the public,hence it is not a bank. 
                     Similarly,if a financial institution only lends the money to public, it can not 
                      be called a bank. 
                     For      example-Insurance         corporation(LIC)         UTI(unit       trust     of 
                      India),IDBI(industrial development bank of India). 
                
               Difference between cental bank and commercial bank  
               Central bank                                    Commercial bank 
                     It  is  the  apex  institution  in  the        It  is  only  one  of  the  unit  in  the 
                      money market.                                   banking  structure  of  the  country 
                                                                      and operates under the control of 
                                                                      central bank. 
                     It  is  generally  governed  and               It can be owned and governed by 
                      owned by the government.                        the government or private sector. 
                     It  operates  in  public  interest             It aims to maximize profit. 
                      without profit. 
                     It has authority to issue currency.            It has no power to issue currency. 
                     It does not directly deal with the             It deals directly with the public. 
                      public. 
                     There is only one central bank in              There are number of commercial 
                      a  country,for  example  RBI  in                banks  in  a  country,for  example 
                      India.                                          state bank of India in India. 
                     Fedral Reserve System in USA.                  Bank of America corps,citigroup 
                                                                      Inc,Morgan Stanley.