A bank is considered to be a financial entity that is licensed to accept payments as well as provide loans and credit to end-users. A bank generally undertakes a variety of additional duties, including wealth management, savings accounts, currency exchange, financial services, money protection, and investment of deposits into funds. The handover of public sector resources to be managed or held by the central or state government is referred to as nationalisation. In India, the process of nationalisation shifted formerly private-sector-operating banks to the state sector, resulting in the formation of nationalised banks. RBI or the Reserve Bank of India was the first nationalized bank in India. Many might not perceive the distinction between nationalised banks and PSBs or public sector banks as significant, but there exists a few major differences.

What are PSBs or Public Sector Banks?

  • The public sector bank is the one in which the government owns more than half of the stock. 
  • The government oversees the financial policies of these institutions. 
  • Since public sector banks are owned by the government, the majority of the depositors think their money is safer in them. Hence, almost all public sector banks get a sizable client base.
  • For instance, the State Bank of India is the country’s largest PSB. The government owns nearly 63 per cent of this bank. The major portion of the rest equity is traded on the Indian stock exchange as well.

What are Nationalized Banks?

  • Once the government acquires a private sector bank, it gets converted into a nationalised bank. This process is referred to as nationalisation.
  • Bank nationalisation entails placing the banks under the control of the government.
  • Following nationalisation, banks are subject to the Banking Regulation Act of 1949.
  • Following India’s independence, the RBI, the central bank of our country, became the first nationalized bank in India. 
  • The RBI went on to become the nation’s banking regulatory authority. 
  • Majority of banks were under private hands at that period, but the government eventually took ownership of a handful of them in order to support India’s expanding financial demands. 
  • According to the RBI’s main site, the number of nationalized banks in India has now reached 19.
  • Out of the 19, the State Bank of India is considered to be the best nationalized bank in India.

Major Differences between Nationalized Banks and Public Sector Banks

The primary distinction between a nationalised bank and a public sector bank is that the latter has always been under the control of the central or state government, whereas the former began as a private sector bank and was chosen to take over by the administration for the betterment of the public.

Parameters

Nationalized Bank

Public Sector Bank

Definition

A nationalised bank refers to one which began initially as a private sector bank before being taken over by the government by some form of law for the welfare of the country.

Public sector banks are the ones wherein the government owns the majority of the ownership. Nationalized banks are likewise public-sector institutions.

Origin

These banks begin in the private sector or below somebody’s control.

These banks begin as state or federal government-owned banks.

Broadness

It is a more specific term than public sector banks, and moreover, a PSB does not have to be a nationalised bank.

Because it is a larger concept, public sector banks encompass all nationalised institutions.

Number

The number of nationalized banks in India is 19.

There exists 12 PSBs in India.

Examples

State Bank of India, Punjab National Bank, etc.

Dena Bank, Bank of Baroda, etc.

Conclusion

Banks are broadly classified into three types: public sector, private sector, and nationalised. There exist no substantial distinctions between a nationalised bank and a public sector bank since all nationalised banks are eventually private sector banks, but the latter does not have to be a nationalised bank. A public sector bank has always been under the control of the government, and the central govt. is the largest shareholder, whereas a nationalised bank begins as a private sector bank and is eventually taken over by the government by an act. Merely 12 PSBs exist, whereas 19 nationalised banks exist. RBI or the Reserve Bank of India was the first nationalized bank in India.