Commercial Bank vs. Development Bank: What's the Difference?
Edited by Harlon Moss || By Janet White || Published on December 8, 2023
Commercial banks offer a wide range of services to all sectors, while small finance banks focus on financial inclusion by providing basic banking services to underserved segments.
Key Differences
Commercial banks are large-scale institutions offering diverse services like loans, deposits, and wealth management to all customer segments. Small finance banks, in contrast, specifically cater to small businesses, marginal farmers, and micro industries.
The client base of commercial banks includes large corporations, SMEs, and individual customers. Small finance banks focus on customers not adequately served by traditional banks, particularly in rural and semi-urban areas.
In terms of services, commercial banks provide a comprehensive suite including corporate banking, international trade financing, and treasury operations. Small finance banks primarily offer basic banking services like deposits, small loans, and remittance facilities.
Commercial banks operate on a larger scale with a wider network and higher capital requirements. Small finance banks have lower capital requirements and operate with a focus on local communities and smaller regions.
Regulatory requirements for commercial banks are generally more stringent, reflecting their larger size and broader scope of operations. Small finance banks, while also regulated, have more relaxed norms to encourage financial inclusion.
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Comparison Chart
Services Offered
Broad range including loans, deposits, wealth management.
Focus on basic banking services like small loans and deposits.
Client Base
Diverse, including large corporations, SMEs, and individuals.
Targeted towards underserved segments like small businesses, marginal farmers.
Scale of Operation
Larger scale with a wider network.
Smaller scale, often localized to communities and regions.
Capital Requirements
Higher capital requirements.
Lower capital requirements.
Regulatory Norms
More stringent regulatory requirements.
Relatively relaxed norms to promote financial inclusion.
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Commercial Bank and Development Bank Definitions
Commercial Bank
A bank that provides loans, accepts deposits, and offers basic financial products.
Customers visited the commercial bank for loan applications.
Development Bank
A bank aiming to promote financial inclusion by offering basic banking services.
The small finance bank introduced no-frills accounts for low-income groups.
Commercial Bank
A full-service bank engaging in retail and corporate banking.
The commercial bank opened new branches in major cities.
Development Bank
A bank specialized in providing financial services to small business sectors.
The small finance bank offered microloans to local farmers.
Commercial Bank
A financial institution offering a wide range of banking services.
The commercial bank launched a new digital banking platform.
Development Bank
A financial institution primarily providing small loans and deposit products.
The small finance bank’s savings schemes were popular among small traders.
Commercial Bank
A bank that participates in international banking and trade financing.
The commercial bank played a key role in the international trade deal.
Development Bank
A bank with a mandate to serve marginalized sections of society.
The small finance bank conducted financial literacy programs in underserved communities.
Commercial Bank
A bank catering to businesses and individuals with various financial needs.
The commercial bank financed several large infrastructure projects.
Development Bank
A banking institution focusing on underserved and low-income customers.
The small finance bank opened branches in rural areas to serve more customers.
FAQs
Are small finance banks found in urban areas?
While they focus on rural and semi-urban areas, they can also operate in urban regions.
Do commercial banks offer agricultural loans?
Yes, they provide a variety of loans, including for agriculture.
Can commercial banks operate internationally?
Yes, many commercial banks have international operations.
Do commercial banks participate in government schemes?
Yes, they often collaborate in various government financial programs.
What is the typical customer of a small finance bank?
Small businesses, marginal farmers, and micro industries.
What is the main focus of a commercial bank?
To provide a wide range of financial services to all sectors.
Are small finance banks important for rural economies?
Yes, they play a crucial role in financial inclusion in rural areas.
What defines a small finance bank?
Its focus on financial inclusion for underserved segments.
Can a small finance bank grow into a commercial bank?
It's possible, but it would require meeting higher regulatory and capital requirements.
Do commercial banks offer insurance products?
Many commercial banks have partnerships to offer insurance products.
What kind of regulatory body oversees small finance banks?
They are typically regulated by national banking authorities.
Is digital banking common in small finance banks?
Increasingly, they are adopting digital services to reach more customers.
How do commercial banks contribute to the economy?
They provide essential financial services that fuel economic growth.
Do small finance banks provide mortgage loans?
Their loan products usually focus on smaller, personal or business loans rather than large mortgages.
Is customer service a focus in small finance banks?
Yes, they often emphasize personalized customer service, especially in local communities.
Do commercial banks offer wealth management services?
Yes, many offer comprehensive wealth management and investment services.
Can individuals open savings accounts in commercial banks?
Yes, they offer a range of personal banking services, including savings accounts.
Are small finance banks a recent development?
They have emerged more prominently in recent decades to address financial inclusion.
Are commercial bank services more expensive than small finance banks?
This can vary, but commercial banks might have higher fees for certain services.
Do commercial banks offer services for high-net-worth individuals?
Yes, they often have specialized services for high-net-worth clients.
About Author
Written by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
Edited by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
