Difference between Commercial Bank and Development Bank Comprehensive Overview
Origin of the Word “Bank”
The word Bank has been originated from many words. There is no single word or answer to this origin of the word ‘Bank’. According to some economists, the word ‘Bank’ has been originated from the German word ‘Banck’ which means heap or mound or joint stock fund. From this, the Italian word ‘Banco’ has been derived. It means heap of money. But according to this group, the word bank is derived from the Greek word ‘Banque’ which mean a ‘bench’. It refers to a place where money-lenders and money changers used to sit and display their coins and transact business. Thus the origin of the word ‘Bank’ can be traced as follows:
Banck
->Banco ->Banque ->Bank
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Table of Contents |
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1. Origin of the
Word “Bank” 2. Bank /
Commercial Bank Meaning 3. What is
Development Bank? 4. Difference between Commercial Banks and
Development Banks 5. List of Top Commercial Banks and Development Banks in India in
2020 - 21 6. List of Top Commercial Banks and Development Banks in USA in
2020 - 21 7. List of Top Commercial Banks and Development Banks in Great
Britain (London) in 2020 - 21 |
Bank / Commercial Bank Meaning:
The Word ‘Bank is used to denote ‘Commercial
Banks’ only. A Commercial bank is a financial institution which deals in money
and credit. The commercial banks accept deposits from those who have surplus
money and give the same to those who are in need of money. As financial
intermediaries, a bank acts as a connecting link between borrowers and lenders
of money. When banks accept deposits its liabilities increase and it becomes a
debtor, but when it makes advances its assets increases and it becomes a
creditor.
Definitions of Banks / Commercial Banks
Various definitions of bank and banking have
been given by various writers. Some of them are listed below:
Crowther defines a bank as, "one that collects
money from those who have it to spare or who are saving it out of their income
and lends the money so collected to those who require it".
In the words of Professor Sayers, “Commercial
banks are institutions, whose debts- usually referred to as bank deposits are
commonly accepted in final settlement of other people’s debt”.
According to Prof. Kinley, “A bank is an establishment which makes to
individuals such advances of money as may be required and safely made, and to
which individuals entrust money when it required by them for use”.
The above definitions of bank reveal that bank
is a Business institution which deals in money and use of money. We can say
that any person, institution, company or enterprise can be a bank. The business
of a bank consists of acceptance of deposits, withdrawals of deposits, Making
loans and advances, investments on account of which credit is exacted by banks.
What are Development Banks?
Development bank is a specialised financial
institution which provides medium and long term finance to business units in
the forms of loans, underwriting, investments and guarantees operations,
promote entrepreneurship and upgrade knowhow and do-how. It is a multi-purpose
financial institution and not just a term-lending institution. It does not
accept deposits from the public, unlike commercial banks. A development bank
does not perform ordinary banking functions.
According to William Diamond, “A Development
Bank has the opportunity to promote enterprises i.e. to conceive investment
proposal and to stimulate others to persue them or itself to carry them through
from the ‘conception’ to ‘realisation’.
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’2013. |
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. |
List of Top Commercial Banks and Development Banks in India in 2020 – 21
|
Commercial Banks |
Development Banks |
|
1. State Bank of India 2. HDFC Bank Ltd 3. ICICI Bank Ltd 4. Central Bank of India 5. Union Bank of India 6. United Bank of India 7. Axis Bank Ltd. 8. Bandhan Bank Ltd. 9. Indian Overseas Bank 10. IDBI Ltd. 11. Oriental Bank of Commerce 12. IndusInd Bank Ltd. 13. UCO Bank 14. Punjab National Bank 15. Yes Bank Ltd. |
1. NABARD (National Bank of Agriculture and
Rural Development) 2. NHB (National Housing Bank) 3. EXIM (Export Import Bank of India) 4. ICICI (Industrial Credit and Investment Corporation
of India) 5. IDBI (Industrial Development Bank of
India) 6. EXIM (Export-Import Development Banks) 7. SIDBI (Small Industries Development Bank
of India) 8. IFCI (Industrial Finance Corporation of
India) 9. SIDCs (State Industrial Development
Corporations) 10. SFCs (State Financial Corporations) 11. IDFC (Infrastructure Development Finance
Company) 12. IIBI (Industrial Investment Bank of
India |
List of Top
Commercial Banks and Development Banks in USA in 2020 – 21
|
Commercial Banks |
Development Banks |
|
1. JPMorgan Chase 2. Bank of America 3. Citigroup 4. Goldman Sachs 5. Morgan Stanley 6. The Bank of New York Mellon 7. PNC Financial Services 8. Capital One 9. HSBC Bank USA 10. UBS |
1. IDB (International Development Bank) 2. CABEI (Central American Bank for Economic
Integration) 3. Inter America Development Bank 4. World Bank 5. World Bank Group (IFC, IDA, MIGA, ICSID) |
List of Top Commercial Banks and Development Banks in Great Britain (London) in 2020 – 21
|
Commercial Banks and Development Banks |
|
1. HSBC 2. Llyods Banking Group 3. NatWest Group 4. Royal Bank of Scotland 5. Barclays 6. Standard Chartered 7. Santander UK 8. Nationawide Building Society 9. Allica Bank 10. Bank of London and Middle East PLC 11. Yorkshire Bank 12. Wesleyan Bank Ltd 13.Weatherbys Bank Ltd 14. Schroders 15. Close Brothers |