Difference Between Commercial and Non-Commercial Bank

It is an evident ubiquitous fact that a bank functions as a commercial institution. It accepts deposits from customers and provides them with interest on the same.


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Many people seek government jobs in the banking sector as they feel immense opportunities to earn a remarkable sum. However, due to limited knowledge about the commercial aspects of a bank, they fail to understand the economics of different types of banks.

Key Takeaways

  1. Commercial banks are profit-oriented financial institutions that offer a wide range of services to individuals and businesses, including deposits, loans, and other financial services. In contrast, non-commercial banks are not-for-profit institutions primarily serving a specific community or group.
  2. Commercial banks aim to maximize shareholder value and profit, while non-commercial banks prioritize their members’ or communities’ needs and interests.
  3. Non-commercial banks, such as credit unions or cooperative banks, may have more lenient lending criteria and lower fees, as their focus is on serving their members rather than generating profits.

Commercial vs Non-Commercial Bank

The difference between commercial and non-commercial banks is their profit-making strategy. Commercial banks operate primarily to earn profits, whereas non-commercial banks operate to provide services to clients.

Commercial bank vs Non commercial bank

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A commercial bank is the type of bank that provides core banking and other financial services to a client. However, by lending loans to large businesses, these banks earn huge profits- which is their prime purpose.

A non-commercial bank is a type of bank that provides limited services to clients. These banks aim not to earn profit but to deliver development opportunities to the people.


Comparison Table

Parameter Of ComparisonCommercial BankNon-Commercial Bank
DefinitionA commercial bank caters to clients’ needs and earns profit on the money deposited by lending it to other people.A non-commercial bank is similar to a non-profit organization as it caters to clients by providing them with traditional banking services only.
Banking Services OfferedA commercial bank offers a wide range of core banking and other services. These include accepting client deposits, dealing with mutual funds and insurance policies, and many others.A non-commercial bank has less to offer in terms of services. Most of these banks only allow money deposition in accounts and small loans.
Principle Of OperationA commercial bank’s primary purpose is earning profit by investing the client’s money in business ventures.The primary purpose of a non-commercial bank is to provide essential banking services and incentives to emerging entrepreneurs.
InfrastructureDue to the enormous profit generation, commercial banks usually have robust infrastructure and facilities for bankers.Due to limited profits earned, non-commercial banks have a simple weaker infrastructure.
SecurityThere are considerable security concerns in commercial banks as they have the freedom to grant loans to any person, irrespective of whether he can return them or not.Non-commercial banks are safe in keeping funds secure as they do not lend large amounts of money to borrowers.
PrevalenceAlmost every bank in urban and suburban areas is commercial. People deposit their money in these banks as they see a good chance of earning higher interest.Non-commercial banks have meagre existence in urban areas. Lower interest rates are the main reason for a decrease in the popularity of these banks.


What is Commercial Bank?

A commercial bank functions for credit creation and thereby helps in the sustainable growth of the economy. It provides a fiscal advantage to both the creditors and the borrowers.

These banks provide all core banking services. They accept deposits in accounts such as savings and recurring and fixed deposits.

They also provide internet banking facilities and allow clients to invest in mutual funds and insurance schemes. They, therefore, earn huge profits on the client’s money.

They grant loans to big businesses and act as the trustee of the client’s money. To do this, they create an account for the borrower.

However, these banks have no security of funds as they grant loans to anyone. This leads to banking fraud.

commercial banks

What is Non-Commercial Bank?

Non-commercial banks usually have no credit earnings. They provide fewer banking facilities to the people by sticking to traditional banking rules.

They can include cooperative banks and rural banks. Their main goal is to alleviate the financial problems of deprived people.

Co-operative banks operate in semi-urban areas and provide services primarily to small businesses. They have low rates of interest for borrowers to support new entrepreneurs.

Rural banks have revolutionized the livelihoods of people living in villages. They have educated the rural masses in undertaking saving practices.

Non-commercial banks have played a vital role in supporting the businesses of marginal farmers and artisans. They have provided them with a chance to develop.

non commercial bank

Main Differences Between Commercial and Non-Commercial Bank

People generally consider banks as commercial institutions that profit from people’s money. However, there exists another type of bank that function with the prime goal of serving people.

Commercial and non-commercial banks are not the same. The key points of difference between the two are:

  1. Commercial banks work to earn profits, whereas non-commercial banks have little to no credit earnings.
  2. Commercial banking offers many services and facilities to clients, whereas non-commercial banking has limited scope in providing services.
  3. ·Commercial banks are widespread in urban areas. On the other hand, non–commercial banks have limited existence in rural and semi-urban areas only.
  4. Due to the high profits earned, commercial banks spend more on infrastructure. Non-commercial banks do not gain much to spend on infrastructure.
  5. Commercial banks are at high risk of losing their client’s money due to loose restrictions in operation. Non-commercial banks work under the guidelines of the state government and have no such issue.
  1. https://www.emerald.com/insight/content/doi/10.1108/10867370910963046/full/html
  2. https://academic.oup.com/rfs/article-abstract/23/10/3595/1565043
  3. https://www.oecd-ilibrary.org/content/paper/5k4dkhztkp9r-en
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