Bank regulation is the regular analysis and audit of banking activities to protect the interest of the depositors through the proper utilization and implementation of laws and rules. The main focus is to stablize the financial system against systematic risks brought on by the individual bank.

The primary aim of bank regulation and supervision is to patronize those activities through which protection of depositor's interest and strength of the whole banking system is increased.

Objectives of Bank Regulation

1. To develop proper and efficient banking system.
2. To stablize and maintain the banking system.
3. To ensure highest safety of depositors.
4.  To ensure the investment in socially preferential sectors.
5. To minimize the problems in banking service.
6. To ensure the proper and efficient competition in banking system.
7. To avoid possible obstacle in banking system.
8. To maintain credit system and flow under control.
9. To maintain the balance in the assets, liabilities in the bank.
10. To ensure public confidence on quality services offered by banks. 

A customer has the following obligations to perform for the bankers-

1. Draw cheques within the balance available in the account.
2. Keep the cheque books carefully so that third parties may not have easy access to that.
3. Pay responsible charges to a bank for service rendered.
4. Inform the banker about any problems attempt of every actions.
5. Draw cheques in such a manner that reduces the chances of problem alterations.

There is a relationship and responsibilities between Bankers and Customers and which is familiar with the term Banker Customer Relationship. A banker has the following obligations or duties to a customer-

1. A banker has to receive customer's money.
2. It is the duty of a banker to honor the customer's cheque.
3. The banker shall have to maintain the sequence of its affairs. There are some authorities who can call for the information. The authorities are income tax authorities and Central Bank. In such cases, bank can disclose the affairs of the accounts of the customers.
4. The banker shall have to serve responsible notices before closing a customer's account if necessary.
5. Bank shall have to provide the customer with cheque books and bank statement.
6. Bank will have to provide the customer all types of banking facilities available in the bank.

Central Bank	Commercial Bank
It is the principle banking institution of the country entrusted with special responsibility of maintaining economic stability.	It accepts deposit from public and finance for the needs of industry.
Profit making is not the objective of central bank but makes profit.	The principle aim of commercial bank is to make profit.
It is the non-competing unique institution.	Commercial banks are in constant competition with others.
There is only one central bank in a country.	There are many commercial banks in a country.
Central bank is the only agency of the country entrusted with the power of note issue.	Commercial banks don’t have the power of issuing notes.
Central bank can not have branches.	They have branches.
It is not generally permitted to take interest.	Commercial banks are permitted to take interest.
Act as a banker of the government.	Act as a banker of general public.
Doesn’t directly deal with public.	Directly deals with public.

The functions of modern commercial banks are as diverse as the functions of a government. As the government has presence everywhere, so is the case with commercial banks. They are also distinct by their presence in all the spheres of life-economic, social and financial. It is well known that the earliest banks started by safe custody, remittance, currency exchange and lending and/or investment.

As the days went by, banks assumed the names of commercial banks and multiplied their functional areas. Lending activity was at one time followed by deposit taking activity. Subsequently, bill collection, bill discounting, foreign exchange business, guarantee business, making payment on behalf of customers, acting as banker to the issue and undertaking public issue of shares, providing specialized services to the customers and so on were added to as their functions. 

Later part of the twentieth century, however, witnessed unprecedented improvement/changes in the banking industry. Introduction of new technology, namely, fax, telex, computer, e-mail and other equipment based on information technology (IT) etc. changed the whole scenario of banking around the world. Dozens of IT related products were added to the list of functions of commercial banks. As a result, it is observed that the commercial banks' services today cover practically all the segments of the economy and society. 

Most of the large and powerful modern banks in the world are popularly known as "Commercial Banks". The very term seems to attract all and sundry and everybody seems to be impressed by their strength, trustworthiness, picturesque facade, attractive location and ever smiling staff. But a very few is sure as to why they are called commercial banks or when from the term was being used. 

Considering the ever changing functional diversity and characteristics, importance and role in the economy and society, modern banks could have been termed otherwise long back. But clearly it was not done so. Large and strong banks around the world are sill called commercial banks though they are engaged in multifarious activities. Why?

The answer to the question probably lies in the fact that the commercial banks have been historically focusing on trade and commerce. It is true that they mobilized or take deposits from everybody. But while lending they certainly prefer financing trade and commerce. This is not, however, without reasons. The funds comprising mainly deposits of commercial banks are of short-term maturity repayable on demand. Therefore, these are to deployed in the sectors requiring funds for short-term deposits (liabilities) may result in mismatch between the assets and liabilities landing the banks into liquidity crisis. 

In order to avoid mismatch between assets and liabilities, the commercial banks prefer financing trade and commerce which require short-term fund. Though the modern commercial banks now a days finance long-term needs, but such portfolio is kept within limits. It is, therefore, quite appropriate that they are called commercial banks. However, they are also currently called deposit money banks in some countries. 

    

Commercial banking and Investment banking combined together is generally referred to as Mixed banking. Such banking of combining together the completely two different types of operations is a new development in many countries. Before this development, commercial banks were engaged in short-term financing while investment banks were engaged in long-term financing. 

The rationale of division of work was simple. Deposits of Commercial banks are of short duration and payable on demand or at short notice. Hence these banks are banks are required to keep their assets as liquid as possible so that assets always match liabilities in terms of liquidity. Any mismatch was avoided to prevent the banks from landing into liquidity troubles. On the other hand, investment bankers lent money for meeting the long-term need of the business and industry. They procured fund of longer duration to avoid any liquidity crisis. 

Separation of business between the two types of banks did not last long. At one stage, investment banks got involved into commercial banking primarily for augmenting their resources by way of mobilizing deposits to meet the growing need of industry. On the other hand, sensing market potential and being emboldened by greater resources commercial banks also did enter into the area of investment and long-term financing.

The result of mixing commercial banking with investment banking has been mixed, to say the least. Commercial banks in many countries landed into troubles and in the long run some even faced closure because of mismatch between short-term liabilities and long-term assets. In view of this new development, the desirability of mixed banking has been subjected to serious debate. Though professional bankers are found to be divided on the issue, yet majority is now found not to favor mixed banking. 

In fact, idea of mixed banking is gradually losing ground specially in view of development of different types of financial institutions to finance long term needs of the industry. Generally commercial banks now do not involve too much into term lending. Whenever they do, a limit is always drawn. As a result, the task of financing the industry is gradually shifting to investment, leasing and specialized institutions. However, recognizing the incompatibility of mixing investment banking with commercial banking, countries around the world have enacted legislation accepting the principle of bifurcation of these two systems of banking.