• Business
  • Finance
  • Banking
  • Education
  • General
  • Law
  • Science
  • IT
  • English

Key Differences

Know the Differences & Comparisons

Difference Between Commercial Bank and Merchant Bank

commercial bank vs merchant bankBanks are termed as the financial institutions, which act as intermediaries between depositors and borrowers. Besides the usual function of accepting deposits and extending credit, many value added services are also provided by the banks. Indeed, there are different types of banks set up to perform different functions. Commercial banks are the banks that provide services to the general public and companies as well.

On the other hand, merchant banks are similar to investment banks as they do not provide regular banking services, rather deals with commercial loans and investment avenues. The article presents you the substantial differences between commercial bank and merchant bank, take a read.

Content: Commercial Bank Vs Merchant Bank

  1. Comparison Chart
  2. Definition
  3. Key Differences
  4. Conclusion

Comparison Chart

Basis for ComparisonCommercial BankMerchant Bank
MeaningCommercial bank is a banking company established by a number of people for providing the basic banking functions i.e. accepting deposits and lending money to general public.Merchant bank refers to the financial institution, that specializes in international trade and provide and array of services to its clients.
Governing Act/bodyRegulated by Banking Regulation Act, 1949.Rules and regulations designed by SEBI.
Engaged inGeneral banking businessConsultancy type business
Nature of loan extendedDebt-relatedEquity-related
Exposure to riskLessComparatively more
RoleFinancierFinancial Advisor
CatersNeeds of general public.Needs of corporate firms.

Definition of Commercial Bank

A commercial bank may be described as the financial intermediary, that offers a number of monetary services to the general public and corporations as well. These are profit making companies, which are owned and controlled by the group of individuals.

The primary function of a commercial bank is taking deposits and granting loans, but it also serves the customers by providing services like:

  • Disbursement of payments
  • Collection funds
  • Providing working capital finance
  • Safeguarding valuables
  • Purchasing and selling securities
  • Bank overdraft
  • Cash credit
  • Discounting bill of exchange

Add to that; it offers a broad spectrum of products to the customers like the savings account, current account, fixed deposits, certificate of deposits, etc. Interest on the deposits is provided to the account holders, as well as the bank charges interest on a loan extended to the customer. The rate of interest on deposits or loans relies on the type of product opted by the customer.

Definition of Merchant Bank

A merchant bank refers to the banking company that provides both financial and consultancy services to the clients. It has got expertise in international finance, underwriting and business loans. It is also engaged in activities associated with the promotion and development of industrial projects such as:

  • Loan syndication
  • Portfolio management
  • Underwriting of capital issues
  • Project counselling
  • Issue management
  • Advisory services on mergers acquisitions and takeovers.
  • Corporate restructuring
  • Acceptance of bills

Merchant bank aims at fulfilling the advisory requirements of big business ventures and high net worth individuals. It provides financing services to multinational corporations and also looks after the management of currency exchange whenever the funds are transferred. It also assists companies in issuing securities using private placements, which do not require adherence to the legal formalities as in the case of initial public offering (IPO).

Key Differences Between Commercial Bank and Merchant Bank

The points given below are important, concerning the difference between commercial bank and merchant bank:

  1. A commercial bank can be defined as the financial intermediary, set up by a group of individuals to offer basic banking services to the general public like accepting deposits and advancing credit. Conversely, merchant banks are the banking company that assist large enterprises in international trade and offer a number of products and services to its clients.
  2. The commercial banks are governed by Banking Regulation Act, 1949. In contrast, the merchant banks follow the rules and regulations framed by SEBI, i.e. Securities and Exchange Board of India.
  3. The main business of the commercial bank is related to regular banking services, whereas merchant banks excel in providing consultancy and advisory services to the clients.
  4. Loan extended by the commercial bank is debt-related. Unlike equity related loans are granted by the merchant banks.
  5. Commercial banks are less prone to risk, while merchant banks are highly exposed to risk.
  6. The role of a commercial bank resembles a financier. On the contrary, the merchant banks act as a financial advisor.
  7. The commercial bank aims at fulfilling the needs of the general public, whereas big business houses that are operating in more than one nation and high net worth individuals are catered by merchant banks.

Conclusion

As both the financial intermediaries cater varied needs of the customers, these are entirely different from one another. A merchant bank charges fees for the financial and consultancy services, commercial bank charges a fee for the facilities provided like ATM, mobile banking and net banking. While commercial bank plays the role of repository for the savings of the customer, merchant bank doesn’t.

You Might Also Like:

Difference Between Merchant Bank and Investment Bank bankDifference Between Investment Bank and Commercial Bank copmmercial bank vs development bankDifference Between Commercial Bank and Development Bank BankDifference Between Central Bank and Commercial Banks in India bankDifference Between Commercial and Cooperative Banks financeDifference Between NBFC and Bank

Comments

  1. G says

    August 17, 2017 at 4:29 pm

    Good article. Keep it up.

    Reply
  2. Madison White says

    November 9, 2017 at 8:21 am

    It’s interesting to know that there are major differences between a merchant and a commercial bank. I’ll make sure to share to bookmark your page for future reference.

    Reply
  3. Shakeel says

    January 24, 2019 at 10:00 am

    Good info in a detailed description

    Reply
  4. FactorLoads says

    November 7, 2019 at 1:49 pm

    Thanks for sharing the difference between commercial bank and merchant bank. This article is very helpful for me. I think that this article will definitely help and guide a lot of business owners.

    Reply
  5. Chris says

    March 2, 2020 at 4:28 pm

    Thanks for sharing the difference of Commercial Bank and Merchant Bank. This article is very easy to understand. I’ll definitely return to this very helpful site.

    Reply
  6. RAJARAM says

    January 28, 2022 at 7:17 pm

    Excellent explanation and to the point in understanding the difference between Commercial Bank and Merchant Banking.

    Reply
  7. Maria says

    January 23, 2023 at 1:57 pm

    Thanks for the nice blog. It was very useful for me. we provide.

    Reply
  8. Samyak says

    October 25, 2023 at 9:45 pm

    very informative. Nicely explained

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Top 5 Differences

  • Difference Between PERT and CPM
  • Difference Between Micro and Macro Economics
  • Difference Between Developed Countries and Developing Countries
  • Difference Between Management and Administration
  • Difference Between Qualitative and Quantitative Research



New Additions

  • Difference Between Deforestation, Reforestation and Afforestation
  • Difference Between Race and Ethnicity
  • Difference Between Customer Service and Customer Experience
  • Difference Between Human Capital and Human Development
  • Difference Between Systems Approach and Contingency Approach
  • Difference Between Industrial Relations and Employee Relations
  • Difference Between Introduction and Executive Summary
  • Difference Between Programmed and Non-programmed Decisions
  • Difference Between Depreciation and Devaluation of Currency
  • Difference Between Consumer Market and Business Market

Categories

  • Banking
  • Business
  • Education
  • English
  • Finance
  • General
  • IT
  • Law
  • Science
fb-follow youtube follow

Copyright © 2025 · Key Differences · Contact Us · About Us · Privacy