Difference Between Universal Banking and Commercial Banking

Banking is the system that handles all financial transactions. Several types of banking that provide different types of facilities, Universal and Commercial Banking, are also 2 types of banking that have their functions and roles.

Universal Banking is much broader, with more functions than Commercial Banking.

Universal Banking vs Commercial Banking 

The main difference between both Bankings is that Universal Banking facilitates the functions of more than one type of bank and provides facilities of commercial banking and Investment Banking. Also, services like insurance are provided by Universal Banking, whereas the facilities provided by Commercial Banking are limited, which mainly include accepting the public deposits and lending them loans along with some other general functions.


Universal Banking is a kind of banking system which provides facilities of more than one type of banking. For example, it provides all the facilities of commercial banking and the facilities of investment banking along with some additional services such as insurance.

Therefore it is a type of banking under which different kinds of banking facilities are provided.

Commercial Banking is the system that works with the motive of profit earning, and for this purpose, it performs the functions of accepting the deposits of the public and lends them the loan.

It also serves some other functions such as discounting the Bills of Exchange, Transfer of Money, and other sundry parts.

Comparison Table Between Universal Banking and Commercial Banking

Parameters of ComparisonUniversal BankingCommercial Banking
DefinitionType of banking which provides functions of more than one kind of Banking.It is a profit-earning institution that performs certain functions.
RoleIt performs functions of depositing money, lending loans, investing and insurance, etc.It mainly performs the functions of accepting deposits and lending loans to the public.
MotiveProfit earning is not the main motive.The main motive is profit earning.
Investment BankingIt performs functions of investment banking.It does not provide any such facilities.
DisadvantagesRisk of failure, Bureaucratic, inflexibility, etc.Expensive, Difficult T&C, profit earning.

What is Universal Banking? 

Universal Banking is a type of banking that performs the functions of different kinds of banks. It serves the parts of a Commercial Banking and Investment Banking and not only this it also provides various other services which include insurance.

Also, its main motive is not profit earning. It keeps on working even if it is not making a profit.

Functions of Universal Banking:

  1. Investing Banking: Universal banks offer the parts of investing the public money too.
  2. Commercial Banking: Universal Banks provides the functions of the commercial bank such as depositing the public money and lending loans to them and many other parts.
  3. Insurance: Universal Banks also offers services like insurance.

Advantages: the main advantage of universal banking is that any individual can have facilities of more than one kind of bank under one roof. It helps customers are investing and proposes the best deal in investments it makes sure that the resources are utilized perfectly.

Disadvantages: although it has a lot of advantages still there are some disadvantages with universal banking, which include inflexibility and delay in working and many more.

Therefore, universal banking is a mixture of both banking and provides different kinds of services under one bank.

What is Commercial Banking?

Commercial banking is a type of financial Institutions that mainly performs functions with a motive of profit earning. It does business with only one motive and therefore also called profit-making institutions.

Functions of Commercial Banking: it accepts deposits from the public, lends loans, discounts bills of exchange, transferring of money, work as an agent, and various other sundry functions are the functions and facilities given by the commercial bank.

The function of increasing or maintaining the supply of money in the economy, which is issued by the RBI, is also performed by the Commercial Banks; therefore, they play a significant role in the economy.

Along with these, commercial banks are also providing some advanced functions such as electronic transfers.

All of its operations are also advantages to the public, including some other benefits, but along with this, there are disadvantages such as inflexibility, high cost, complicated terms and conditions, and many more.

There are mainly two types of commercial banking: Scheduled Commercial Banks and Non-Scheduled Commercial Banks. Scheduled Commercial Banks also have three Types; these are Public Sector, Private Sector, and Foreign Banks.

Main Differences Between Universal Banking and Commercial Banking

  1. Universal Banking is the type of banking that provides facilities of more than one king of banking, whereas Commercial banking is the type that offers bounded facilities.
  2. Universal Banking performs functions of commercial as well as investment banking along with some additional parts, whereas Commercial Banking performs functions which mainly include accepting deposits and lending loan with some other functions.
  3. The main motive of Universal Banking is not profit, they work even if they are not earning a profit, but the main reason for Commercial Banking is indeed making a profit.
  4. Universal Banking performs the functions of Investment Banking, whereas no such operations are performed by Commercial Banking.
  5. Universal Banking has disadvantages such as Inflexibility, Risk of Failure, Bureaucratic, etc., whereas the Disadvantages with Commercial Banking are that it is Expensive, has complicated Terms and Conditions, it is a profit-earning institution.


Hence it is clear that Commercial Banking is a sub-part of Universal Banking, and although both of them perform few same functions but still the fact that Universal Banking is much broad banking than Commercial Banking which also includes the parts of investment banking, differentiates it from Commercial Banking.

Commercial Banking also has different, but the main functions remain the same. Except this, the significant difference between both is that the main motive of Commercial Banking is to earn a profit, whereas there is no such motive of Universal Banking. They work even they are not making a profit.


  1. https://www.emerald.com/insight/content/doi/10.1108/eb018653/full/html
  2. https://www.nber.org/system/files/chapters/c7237/c7237.pdf
  3. https://www.aeaweb.org/articles?id=10.1257/jep.8.3.121
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