Merchant Bank vs Development Bank – Difference and Comparison - Differ Between (2024)

FAQs

What are the two major types of banking institutions explain the differences between them? ›

Commercial banks are the traditional "department stores" of the financial services world. Thrift institutions and credit unions are more like specialty shops that, over time, have expanded their lines of business to better compete for market share.

Commercial banks primarily focus on providing comprehensive financial services to a broad range of customers while aiming for profitability. Development banks, on the other hand, concentrate on fostering economic development by providing long-term financing for projects and sectors that contribute to societal progress.

Merchant banks specialize in providing services for private corporations. Unlike retail or commercial banks, merchant banks do not typically provide financial services to the general public. Unlike investment banks, they focus on private companies not public companies.

Difference Between Merchant Bank and 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.

Key Learning Points

Retail banks offer loan and deposit services to the general public. Deposits are generally insured by the government up to a specified limit. Commercial banks provide services to corporations, with loan and deposit products tailored to these customers' needs.

Each has some special features: ​Banks emphasize business and consumer accounts, and many provide trust services. Credit unions emphasize consumer deposit and loan services. ​Savings institutions emphasize real estate financing.

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.

General development banks are those focused on providing loans for or investing in the equity of industrial and/or infrastructure projects. It includes also banks that provide guarantees so that industrial or infrastructure projects can get private funding.

Development banks are specialized financial institutions. They provide medium and long-term finance to the industrial and agricultural sector. They do term lending, investment in securities and other activities. They even promote saving and investment habit in the public.

Disadvantages of Merchant Bank

Risk: Merchant banks typically invest their own capital in the companies they work with, which means they are exposed to the same risks as other investors. If a company fails, the merchant bank could lose a significant amount of money.

Do merchant banks take deposits? ›

Merchant banks are non-depository banks that generally do not cater to the banking and finance needs of the general public. Merchant banking is a select set of professional services available to large corporations, HNIs, institutional investors, and venture capitalists, among others.

Merchant banking is a professional service provided by the merchant banks to their customers considering their financial needs, for adequate consideration in the form of fee. Merchant banks are banks that conduct fundraising, financial advising and loan services to large corporations.

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 ...

The main difference between a merchant account and a business bank account is that a merchant account allows you to manage credit card transactions while a business bank account allows you to manage all of your funds.

Well, a merchant account is another kind of account that businesses must have, but its function is much more limited than a business or personal account. In short, they allow you to accept online credit or debit card payments and receive funds directly through your website.

Under the umbrella of banking and finance, the industry has commercial banks—which are consumer facing like Bank of America—as well as central banks—the government entities that regulate the industry and manage monetary policy.

Two of the most common types of banks are commercial/retail and investment banks. Mainly based on type, a bank may also provide different financial services starting from providing safe deposit boxes and currency exchange to wealth management and retirement.