1.

Why is central bank an apex bank of the country ? State any three points of distinction between a central bank and commercial banks.

Answer»

A central bank is an apex bank of the country because it regulates the money suppl/ with a view to achieve economic stability. A central bank controls the entire banking system by controlling their operations through credit control measures such as bank rate, repo rate, reverse repo rate, cash reserve ratio etc. 

Following table shows the distinction between a commercial bank and a central bank :

Basis of DistinctionCommercial BankCentral Ban
(i) ObjectiveIts objective is to earn profits by discharging its functions.Its objective is to bring economic stability in the country.
(ii) StatusIt is just a unit of banking system and carries out the directions of the central bank.It is the apex body and controls the entire banking system.
(iii) NumberCommercial banks may be many and each bank may have a large number of branchesA central bank is one in number but may have a few branches.
(iv) Relationship with peopleA commercial bank maintains a direct relation with the people as it accepts deposits and gives loans.It has no direct relation with the people at large.
(v) Relationship with governmentA bank may be in private sector or in public sector.It is a government agency.


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