Difference Between Personal Banking and Commercial Banking

Edited by Diffzy | Updated on: April 30, 2023


Difference Between Personal Banking and Commercial Banking

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The bank is a financial institution that plays a vital role in economic sectors. Banks take customers' deposits and in return, they pay annual interest. Banks use these deposits to lend to other customers, in the form of a variety of loans. The difference between the two interest rates is the profit margin for banks. The people feel safe depositing their money in the bank, and it raises the standard of living in general. The bank offers interest on deposited money annually which helps in money-losing value against inflation.

Banks also offer a service for people wishing to expand & develop their businesses and help people to save & grow their wealth. They even provide financial advice and financial services. Accounts of various types, such as current accounts, savings accounts, fixed deposit accounts, provident fund accounts, and so on, can be established. Banks are taking a number of steps to protect themselves from risks that they might face in the future. One way is to increase the number of deposits that they have so that they can take out more loans and make more profits.

Bank loans and mortgages enable us to purchase items that are out of our price range and repay them over time. Many people, for example, use such loans to purchase real estate, expand businesses, acquire land, or purchase any automobile/car. These bank loans and business investments are critical for enabling the country's economic growth.

And nowadays, credit cards and online payments are used, and liquid money is less used due to technological advancements. Banking purposes vary depending on the type of consumers, such as retail banking, personal banking, or commercial banking.

Personal Banking Vs. Commercial Banking 

Personal banking is also called retail banking, and it is referred to as the bank that directly deals with the consumer. Various divisions of the banks are located in the nearby area of residence. They provide all the financial services to the general public. The financial services and products any bank offer differ from bank to bank. The name Retail Banking refers to a business that is of small volume, the one which offers goods and services for consumption rather than use for another business.

Private banking and corporate banking are two subsets of commercial banking. Commercial banking is also called business banking as it provides advice, loan and services to businesses, governments, and other organisations. When compared to retail banking, we can see that retail banking provides services for individuals, whereas commercial banking provides services for various organisations and institutions.

For example, a retail cook would offer his/her food for someone to bring home to eat that dish, while a wholesale cook or commercial cook would offer his/her dishes for restaurants to resell as part of their business model. Retail banking operates similarly, offering services for individuals to manage their financial needs, and commercial banking offers its services to the whole institution and fulfilling their needs. Whereas business banking products are similar to those offered by retail banks, the terms of commercial banks differ.

Difference between Personal Banking and Commercial Banking in Tabular form

Parameters Personal Banking Commercial Banking
Meaning Banking meets individual needs by providing financial services and advice. The consumer is offered services such as a short-term loan, a long-term loan, credits, savings, and so on. The banking system satisfies the needs of the organisation or Governments for investment and consumption that leads to profit in any way. They accord the deposited amount to the retailer and lend the loan to institutions to make profits.
Function Personal banking's function is to manage clients' accounts, transactions, and money, as well as to provide financial support, advice, and any other services that may be required. The main function of commercial banking is to accept all the deposits (Public, savings, fixed deposits and recurring deposits) and lend them as loans for investments.
Customers The customers are mostly individuals or families or some small business owners. The customers are small business owners to the large business and corporation owners. Sometimes the commercial customer can be another bank.
Profitability The amount of money involved in personal banking is less so the profitability is less. The amount of money involved in commercial banking is more so the profitability is more.
Loans The personal banks provide auto loans, personal loans and mortgages. Usually, the amount of loans taken is small. Commercial banks provide larger loans and lines of credit for some corporations to stay in business.
Acceptability of risk No such scheme as high profit - high risk. Not prone to risk. Many large commercial clients have access to some high profit - high-risk schemes.
Debiting Personal loans, lines of credit, credit cards, and debit cards are provided to individuals for their spending. Corporate credit cards and lines of credit are provided for any use by the organisation.

What is Personal Banking? 

The name defines the aim of the bank, it is also called retail banking. Personal banking is for the personal use of an individual or family. These banks have direct contact with the individual through their various branches of the bank that are located in numerous places. 

The individual can deposit his/her earned money in the personal bank account for safety and further use. Many personal banks pay interest on deposits, which helps people avoid losing money due to inflation.

The banking services today do not only limit to traditional ways of working (traditional as keeping money, moving and sending it to someone else or debiting for personal use). Banks have begun to provide broad knowledge about finances, investment policy, safe return of money, saving advice, wealth management, and more life advice after retirement, among other things, in modern times.

The fixed deposit and provident fund profits have a good rate of interest of 5-6% and 7-7.8%, respectively, ensuring low-risk moderate profit schemes. Personal banks are trying to expand the footprint of their advising services. And they are trying to bring an even broader range of consumers, as these are the services the high-net-worth individual have accessed.  

Some personal bank even acts as middle agent for providing a few more external services like life insurance, Mediclaim, and car insurance but most banks these days even provide all the mentioned facilities. Cash access has become quite simple in recent years, most notably through ATMs and, later, cheques, which are now less common. 

And, because most transactions in the modern world are done online, there are many third-party apps on the market that are used to transfer money.

Retail banking encompasses a wide variety of products and services including:

  • Current and savings accounts
  • Fixed deposits & Recurring deposits
  • Provident fund account 
  • Automobile financing
  • Credit cards
  • Debit cards
  • Lines of credit and other personal credit products
  • Foreign currency and remittance services
  • Stock brokerage 
  • Insurances
  • Wealth management

What is Commercial Banking?

The banking sector which evolves around most businesses and corporate is known as and commercial bank or business bank. The client of commercial banks ranges from small to mid-sized businesses with millions in revenues to large multi-billionaire companies across the country.

Commercial banking was coined in the United States of America to distinguish it from investment banking. Until the Glass-Steagall Act of 1933, which was repealed in the 1990s, most banks offered commercial and investment banking under the same name.

These banks are originators for providing loans to customers. Due to such investment in large companies and corporations, economic growth is increasing. The loan provided to the company is used for company expansion, hiring different people for different jobs. The large loans offered by commercial banks allow a company to stay in business. 

The types of account we can have in commercial banking is the same as retail banking i.e., current account, savings account, and fixed deposits. But as we get an annual interest in retail banking no such perk is there in commercial banking. 

Some commercial banks have a scheme for high-risk/high profit but the customer should have the courage to take the high risk, and in commercial banking sectors, most businesses and large companies often take the high-risk path. And such banking even provides access to some unregulated hedge funds. 

The commercial bank provides cash management software or an app to simplify payment and collection management. They also offer a variety of plans to businesses, such as health insurance, retirement plans, and disability programmes for employees.

Corporate banks offer the following products and services to corporations and other financial institutions:

  • Loans and other credit products
  • Cash management services
  • Equipment lending
  • Commercial Real Estate
  • Trade finance
  • Employer services
  • Asset management 
  • Securities underwriters

Main Difference between Personal Banking and Commercial Banking in Points

  • The first and main difference would be a personal bank is for general people's use, and a commercial bank is for large companies, organisations and government bodies. 
  • In a personal bank, the financial needs of an individual are satisfied by giving financial services, and loans account handling. In the case of commercial banking, the customer is the company the financial need of the company is satisfied through the same financial services, but the number of people involved differs, and so do the terms of commercial banking. 
  • Although commercial banking provides the same bank account type as a retail bank account. The individual gets annual interest for the amount deposited in a personal bank account, but no such interest is provided in commercial banking. When compared to commercial banks, the number of loans granted by personal banks is lower. 
  • A personal bank loan can be used to buy a house, a car, a plot of land, or an expensive electronic item, whereas a commercial bank loan can be used to help a business survive or expand.
  • The scheme provided by the personal banking system is of low risk to low profit or moderate profit, but the scheme that is avail to commercial bank consumer are of high-risk high-profit. 
  • Along with profits come the risk that is to be bear by the consumer. Because the amount of money involved is smaller in personal banking, the risk is less acceptable. And in the case of commercial banking, the amount of money involved is too large. As a result, the acceptability of risk is too high.
  • For cash debiting, the personal bank provides credit cards, debit cards, ATMs, personal loans, etc., and on the other hand, the commercial bank provides corporate credit cards and lines of credit. 
  • With a personal banking account, one can do trading and invest in the stock market, companies or organisations cannot do that with a commercial bank account. 


The financial sector is one of the most important parts of the global economy – both personal and commercial. The commercial and personal banking sectors take the deposit of the consumers and later on lend the loans to those in need. Banking also helps create credit, provide financial advice, facilitate trade and even help in the formation of capital. And in the modern world, consumers increasingly need banks for paying bills. And bank earns incredible profit in lending loans also they can incur a significant cost for the firm.

Both commercial banking and personal banking fulfil the needs of their respective consumer in the best way possible. Both sectors have advantages and disadvantages, but they are growing at a rapid pace in these times. Furthermore, customers are given the option of choosing between personal and commercial banking. Furthermore, the consumer should have no difficulty determining which type of bank account - savings, current, fixed deposits, and so on - is required to meet their needs.

Profits & losses, loans, types of accounts, interest rate, cash management & access and insurance are the most important, and basic things we look at when any consumer chooses their choice bank. Understanding the difference in each and choosing the best that satisfies your need is crucial. And due to growth, the technology most banks are operating online which makes it even more convenient and easier on both ends – consumers and bankers.


  • https://www.sapling.com/6376518/commercial-banking-vs-personal-banking
  • https://www.thestreet.com/markets/retail-banking-vs-commercial-banking-15109546
  • https://finance.yahoo.com/news/retail-banking-vs-commercial-banking-162300341.html


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"Difference Between Personal Banking and Commercial Banking." Diffzy.com, 2024. Sat. 02 Mar. 2024. <https://www.diffzy.com/article/difference-between-personal-banking-and-commercial-banking-1050>.

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