Learn Difference Between Commercial Bank and Development Bank (2024)

Within the banking industry, various types of financial institutions serve different purposes and cater to diverse needs. Two significant players in this realm are commercial banks and development banks. While they share similarities in providing financial services, there are distinct differences in their objectives, functions, and target clientele. In this article, we will explore the dissimilarities between commercial banks and development banks, shedding light on their roles, operations, and impact on the economy.


Commercial Bank

Development Bank


Provides a wide range of financial services to individuals, businesses, and organizations, with a primary focus on accepting deposits, granting loans, facilitating payments, and offering various banking products.

A specialized financial institution that primarily focuses on providing long-term financing, investment, and development support to specific sectors or industries, typically targeting economic growth and development objectives.

Target Customers

Serves a broad range of customers, including individuals, small and medium-sized enterprises (SMEs), large corporations, and other financial institutions.

Primarily targets specific sectors or industries that require development support, such as agriculture, infrastructure, renewable energy, housing, small-scale industries, or entrepreneurship.

Profit Orientation

Operates with a profit motive, aiming to generate income for shareholders and stakeholders by earning interest on loans, charging fees for services, and engaging in other financial activities.

While profit generation is also a consideration, development banks often prioritize developmental objectives over maximizing profits. They may be government-owned or have a social mandate to promote economic growth and stability.


Offers a wide range of banking services, including deposit accounts, loans, mortgages, credit cards, trade financing, investment products, foreign exchange, and other financial products and services.

Provides specialized financing options, including long-term loans, project financing, equity investments, technical assistance, capacity building, and other development-oriented financial services tailored to the needs of specific sectors or industries.

Regulatory Oversight

Subject to banking regulations and supervision by regulatory bodies, such as central banks or financial regulatory authorities, to ensure compliance with prudential norms, capital adequacy requirements, consumer protection regulations, and other banking regulations.

Development banks may also be subject to certain regulations and oversight by relevant authorities. However, their operations and regulations may be specific to their developmental objectives and the sectors they serve.

Capital Mobilization

Raises funds through various sources, such as customer deposits, loans from other financial institutions, issuing bonds, equity financing, and other capital market activities.

Sources funds from government contributions, international financial institutions, multilateral agencies, capital markets, and other sources dedicated to promoting development objectives.

Risk Profile

Manages a range of risks typically associated with commercial banking activities, including credit risk, liquidity risk, interest rate risk, and operational risk.

Also faces risks associated with development financing, such as project risk, sector-specific risks, political and regulatory risks, and economic stability risks in the countries or sectors they operate in.

Geographical Reach

Can operate domestically and internationally, serving customers within their operating jurisdictions.

May operate within a specific country, targeting specific sectors or industries that require development support. Some development banks may also operate at a regional or global level, focusing on development projects in multiple countries or regions.


Commercial banks include well-known global banks, regional banks, community banks, and online banks. Examples include JPMorgan Chase, Bank of America, HSBC, and Citibank.

Development banks include institutions like the World Bank, Asian Development Bank, African Development Bank, Inter-American Development Bank, and national development banks established by governments to support specific development goals.

Focus on Development Goals

Commercial banks may support economic growth indirectly through their general banking activities but do not have a primary focus on specific development goals.

Development banks are explicitly dedicated to promoting economic development, poverty reduction, infrastructure development, sustainable growth, and other development objectives within their target sectors or industries.

Learn Difference Between Commercial Bank and Development Bank (2024)


Learn Difference Between Commercial Bank and Development Bank? ›

Functions: Commercial banks offer comprehensive banking services to individuals, businesses, and governments, including deposit accounts, loans, payment services, and investment products. Development banks specialize in providing long-term financing for infrastructure projects, small and medium-sized enterprises (SMEs) ...

What is the main difference between a commercial bank and another bank? ›

The key difference between retail and commercial banking is who the products are designed for. While retail banks service individuals, communities, small businesses, and families, commercial banks focus on larger companies, government entities, and institutions.

What do you mean by development bank? ›

Development banks are specialized institutions that provide medium and long-term credit lending facilities. Their main objective is to serve the public interest instead of earning profits. They provide financial assistance to both public as well as private sector institutions.

What is the difference between a merchant bank and a development bank? ›

Merchant banks are owned by private individuals or institutions, and they focus on making a profit, whereas development banks are owned or controlled by national governments, and they focus on promoting economic growth and development.

What is the difference between commercial bank and non commercial bank? ›

Commercial banks are for-profit institutions that accept deposits, make loans, safeguard assets, and work with many different types of clients, including the general public and businesses. However, if your account is with a community bank or credit union, it probably would not be a commercial bank.

Is JP Morgan a commercial bank? ›

We are a leader in investment banking, financial services for consumers and small business, commercial banking, financial transactions processing and asset management.

Is Wells Fargo a commercial bank? ›

Who we are. Wells Fargo Commercial Banking provides market-leading solutions, industry expertise, and insights to help enable our clients' growth and success, enhancing the communities we serve.

What is the main function of a development bank? ›

Objectives of Development Banks

Their main aim is to promote industrial growth and serve the public rather than profit. Their financial assistance is provided to the private and public sectors. Since many backward areas are overlooked, development banks develop such neglected areas.

What is the primary function of a development bank? ›

They engage in a term loan, securities investing, and other operations. They even encourage people to save and invest money. In other words, we can say, “Development banks are financial entities whose main purpose (motivation) is to fund society's primary (basic) needs.

Which bank is known as development bank? ›

SIDBI, NABARD, IFCI are examples of development banks.

What is the difference between bank and development bank? ›

While Commercial Banks are primarily concerned with profit, Development Banks aim to promote economic and social development by providing financial resources for projects that might not otherwise secure financing from Commercial Banks due to their high risk, long gestation periods, or because they are not immediately ...

Is Goldman Sachs a merchant bank? ›

Merchant banks issue letters of credit, internationally transfer funds, and consult on trades and trading technology. They charge fees to provide advisory and other related services to their clients. Leading merchant banks include J.P. Morgan (JPM), Goldman Sachs (GS), and Citigroup (C).

What are different types of banks? ›

Types of Banks in India
Banking Classification in India
Types of BanksSub-types
Commercial Banksa) Private Sector Banks b) Public Sector Banks c) Regional Rural Banks d) Foreign Banks
Co-operative Banksa) State Co-operative Banks b) Urban Co-operative Banks
Payment Banks-
6 more rows

Why is it called a commercial bank? ›

A commercial bank is a kind of financial institution that carries all the operations related to deposit and withdrawal of money for the general public, providing loans for investment, and other such activities. These banks are profit-making institutions and do business only to make a profit.

Are all banks commercial banks? ›

Classification of Banks in India

Commercial Banks can be further classified into public sector banks, private sector banks, foreign banks and Regional Rural Banks (RRB). On the other hand, cooperative banks are classified into urban and rural. Apart from these, a fairly new addition to the structure is a payments bank.

What are not commercial banks? ›

There are three major types of depository institutions in the United States. They are commercial banks, thrifts (which include savings and loan associations and savings banks) and credit unions.

What is the difference between commercial bank and private bank? ›

What is the difference between commercial banking and private banking? Commercial banking is a type of banking that provides services to businesses, corporations, and other commercial entities, while private banking provides services to high-net-worth individuals, families, and trusts.

What are the two 2 primary differences between a commercial bank and a credit union? ›

The main difference between the two is that banks are typically for-profit institutions while credit unions are not-for-profit and distribute their profits among their members. Credit unions also tend to serve a specific region or community.


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