Banks are financial institutions that accept deposits from customers and allow withdrawals when the customers need them. In the meanwhile, they let people borrow money deposited by other customers and charge interest rates on the loans. Banks also pay interest to people on deposits. However, the interest rates on loans are much more than the interest on deposits. That’s how banks make their money.
For both consumers and business owners alike, banks are an essential aspect of the economy. As financial service providers, they provide a safe location for you to keep your money. Check writing, deposits, and bill payments can all be done through a number of account types, such as a checking or savings account or a certificate of deposit (CD). If you’d like to keep your money in the bank, you may do so and earn interest on it.
Banking Sector: Types of Banks
Public Sector Banks
PSBs are a prominent form of government-owned banks in India, where the Ministry of Finance of India or State Ministry of Finance of various State Governments of India holds a majority share (i.e. more than 50%) in each of the PSBs. Non-gazetted officers are those who work for these companies and the subsidiaries of these companies. They are all full-fledged government personnel who work for these organisations and their subsidiaries. It is possible to buy and sell stocks at these banks. Their primary goal is to improve the lives of others.
Private Sector Banks
After the LPG policy was implemented in the 1990s, private banks were recognised. Axis Bank and IndusInd Bank are two of India’s oldest and most renowned private banks, founded in 1993 and 1994, respectively, when the government permitted them to do so. The extremely competitive mindset and technological supremacy of private sector banks are well-known characteristics of the industry. Thus, jobs in private banking tend to be more competitive, with employees expected to exceed expectations and reach high standards in order to advance in their positions.
Public Sector Banks vs Private Sector Banks
‘Who controls them?’ is the most significant difference between them. The Government controls a majority of the share in a Government bank.
In contrast to commercial banks, which must be registered with the Indian Companies Act in order to operate, public banks are established by the passing of legislation in Parliament.
Foreign direct investment (FDI) in public banks accounts for 20% of total FDI, although this figure is substantially larger in private banks (74%).
The technology employed by private banks is more advanced than that of public banks. Private ones are also quicker to adopt new developments.
Private banks’ primary goal is to make a profit, whereas public banks’ primary goal is to help the country’s underprivileged communities.
As a result of their extensive network and well-regarded reputation, public banks have a larger clientele. Their scope and reach are greater than that of private banks.
Customer service by the public banks is nonexistent.
High-ranking positions in private banks are awarded solely based on performance. However, at public banks, seniority is given more weight when it comes to promotion.
Public Sector Banks: Privatisation
Two public sector banks will be privatised as part of this fiscal’s disinvestment plan. The Central Bank of India and the Indian Overseas Bank have been shortlisted by Niti Aayog. It’s still too early to make a definitive judgement on the contenders. Banking Laws Amendment Bill 2021 is not on the current legislative agenda. Banking Companies Acquisition and Transfer of Undertaking Act, 1970 and 1980, and related adjustments to the Banking Regulation Act, 1949 are the aims of the bill, which is now being debated. The law proposes that the government keep a 26 per cent interest in the banks that are to be privatised. An important first step in reducing public-sector-bureaucracy (PSB) dysfunction would be to dispel long-standing misunderstandings about privatisation. Many individuals believe that privatising public savings banks (PSBs) would be illegal since it would be a breach of the social compact that underpins the existing system. Thanks to a recent ruling, the Supreme Court has rejected the trusteeship notion. Banks and their customers have a debt-credit connection, but the public perception refuses to recognise it.
Banks like ICICI and HDFC, which were granted licences after liberalisation in the 1990s, are examples of new generation private sector banks. They are formidable competitors in the public sector because of their better service offerings. There are 27 public sector banks and 22 private sector banks in the country. Public sector banks make up 72.9 per cent of India’s overall banking business, while the balance is occupied by private institutions.