4 Key Differences Between Commercial & Corporate Banking (2024)

The banking industry has been a real boon to civilisation. Throughout the ages, we have seen how banks have played a vital role in shaping our society. This success has led to the creation of different banking systems.

It is an exciting time to be in the banking business. As India’s economy continues to boom, banks have some responsibility towards our national prosperity. Many of India’s top banks, such as SBI, HDFC, ICICI, Axis and Bank of Baroda, have branched into different financial services to suit the specific needs of people, families, small businesses and mega-corporations. To do this, they need to hire efficient and educated professionals who are able to handle different clients and job functions.

If you are a finance student hoping to become a banking professional, then stay on the page. We are going to explore two major banking systems and understand their differences and similarities – commercial banking vs corporate banking. So let’s get started.

What is commercial banking?

Businesses need funds to expand. Farmers require loans to buy seeds and farming equipment. And entrepreneurs require financial banking for their ideas to become reality. They all turn to commercial banks for monetary support. The government of India nationalised 14 commercial banks in the 1960s, and since then, banks have evolved to become major players in the country’s economic development.

So what does commercial banking do? The institution takes in deposits from individuals and businesses and uses a part of it to fund several start-ups, small companies, large corporations, entrepreneurs and rural businesses. Commercial banks empower people to build their ventures, create new jobs, enhance profits and have a thriving economy. They provide businesses with an influx of cash to carry out their operations, fulfil sales, expand inventory, buy raw resources and many other activities.

Features of commercial banking:

• Helping people build their wealth by depositing savings in a bank account and earning interest.
• Offering a variety of customised loans to various businesses and entrepreneurs across the country.
• Opening branches in non-urban areas and granting MSME and SME loans to farmers and rural traders.
• Creating specialised credit cards to suit specific business needs.
• Financing local and international transactions during trade.
• Companies can get commercial vehicle funding for business-related transportation.
• Commercial banks also offer locker facilities, foreign exchange and investment services.

Also Read – The Critical Importance of Commercial Banking in India

What is corporate banking?

Corporate banking is another type of banking that provides financial services to large organisations. These services have been created keeping in mind the business needs of the company. As mentioned above, commercial banks offer loans to all businesses, especially those that are small or mid-sized. Corporate banks are different in this respect. They lend money to large corporations. They work with government organisations and companies that bring in huge turnovers. These business giants borrow enormous amounts of money from banks at high interest.

This funding helps with building infrastructure, expansion planning and product diversification. India is one of the fastest-growing economies in the world, and corporate banking helps to sustain the growth. The bigger the business, the larger the loans it needs to continue to thrive. Corporate banking offers a wide range of services to help these companies be even more profitable, and in turn, make huge profits through interest rates.

Features of corporate banking

• Offer high-profile companies several financial services such as cash management, trade finance, asset management and underwriting.
• Provide accurate financial information about the company to investors.
• Companies set up corporate accounts as it helps them calculate the precise amount of tax they have to pay on their profits.
• Corporate banks also have working capital finance that develops financial solutions such as loans, credit and bank guarantees for companies.
• Letters of credit service is another feature of corporate banking.

Commercial banking vs corporate banking: key differences

Also Read –Breaking Down the Functions of Commercial Banking: An Essential Guide

Commercial banking vs corporate banking: career path

Also Read –Different Types of Commercial Banks and Their Roles in the Economy

How Proschool’s finance courses can lead to a banking career

You need the right credentials to work for a commercial or corporate bank. As one of the top Indian coaching institutions, Proschool offers several courses for aspiring banking professionals. You can enrol for the CFA, CFP, financial modelling or investment banking programs, which help you develop the expertise and skills needed to work in this industry. Proschool’s teachers are professional finance experts who give students a unique learning experience through innovative methods and practical training. To work in banking, you need the right mix of skills and knowledge. Proschool’s courses cover all the core concepts, important topics and essential tools you need to know. Professors also engage students with case studies and examples, ensuring that the learning goes beyond textbooks. If you are stuck between commercial banking and corporate banking, Proschool’s courses can help you understand both paths.

Here are more reasons why you should study with Proschool:

• Professors are known to give personalised attention, customised study plans and moral support.
• Students can join any of the coaching centres spread across India. Those who don’t have access to a classroom can join online.
• To help you prepare for the course exams, Proschool offers mock tests, practice papers, prep books and other learning resources.
• Proschool has a high success rate of students clearing exams and getting job offers.
• There is also a placement portal which connects you with entry-level job openings in the finance industry.
• Students are given recruitment training to help them nail their interviews.

FAQs

• Is corporate banking and business banking the same thing?

Both banking systems cater to the financial needs of a business. Many considered them to be the same thing. However, some finance professionals feel corporate banking is geared more towards large-scale companies, whereas business banking looks after mid-sized or smaller organisations.

• What banks fall under the commercial bank umbrella?

Commercial banks are a for-profit organisation that also helps with economic development in a country. To achieve these goals and be accessible to the general population, commercial banks have four types of banks. They are public sector banks, private sector banks, regional rural banks and foreign banks.

• Which banks are considered to be corporate banks?

Many big bank brands such as SBI, HDFC and ICICI have a corporate banking division. Any bank that offers financial services to large organisations is a corporate bank.

• Which field is more demanding — corporate or commercial banking?

While the two types of banks have their individual share of challenges, they are both equally demanding.

• What skills are required in corporate banking?

Your skills depend on which role you take up. Relationship managers require good communication, interpersonal skills and financial acumen. Financial analysts should have quantitative skills, analytical thinking and strong industry knowledge.

Conclusion

When it comes to commercial banking vs corporate banking, it is easy to understand the differences. Commercial banking deals with all types of businesses across all sections of society, from rural to urban. Corporate banks work with large MNCs and organisations with huge turnovers.

Now let’s discuss the similarities. Both offer exceptional opportunities to young finance professionals. Both have interesting job profiles and terrific prospects. So where do you want to work?