Public and Private Sector Banks in India

The Reserve Bank of India is the country’s top bank, and it is the monetary authority over the banks. Also, it is in charge of overseeing the country’s financial system. It is also known as the banker’s bank, and it regulates all of the country’s banks, including cooperative, commercial, and development banks. A few examples of commercial banks are Public sector banks, private sector banks, foreign banks, regional rural banks, and local area banks. Except for eight banks (SBI and seven associate banks), all Indian banks were private sector until July 1969, when 14 commercial banks were nationalised. Further six more banks in the year 1980. Additionally, in 1993, After the implementation of the Liberalisation Policy, a few private banks entered the scene.

Reserve Bank of India

The Reserve Bank of India (RBI) is India’s central bank and regulatory authority, in charge of the issuance and supply of the Indian rupee as well as banking sector supervision. It also oversees the country’s primary payment networks and aims to forward the country’s economic growth. A few of the important departments of the Reserve bank of India are:

• The Bharatiya Reserve Bank Note Mudran, which is the in-charge of printing and minting Indian banknotes and coins
• National Payments Corporation of India, which regulates India’s payment and settlement systems
• Deposit Insurance and Credit Guarantee Corporation, which provides deposit insurance and credit guarantee to all Indian banks

Public Sector Banks

Public sector banks are those in which the federal or state government owns more than 50% of the stock. These financial institutions are publicly traded. PSBs are the largest type of banks in the Indian banking system, and they were founded before independence. The public sector banks control more than 70% of the market share in India’s banking industry. These banks are divided into two categories: nationalised banks and state banks and their affiliates. In India, there are 27 public sector banks of various sizes. India has a total of 19 nationalised banks, with 8 State Bank of India Associates. Almost every PSB has the same business concept, organisational structure, and HR regulations. As a result, there is rivalry among these banks in the market niche to which they provide services.

Private Sector Banks

Private sector banks are those in which private corporations and shareholders own the majority of the stock rather than the government. Private sector banks have been classified into two types. First is the Old Generation Private Sector Banks. These are banks that existed during the nationalisation of major banks, but were not nationalised because of their small size, etc. Some of these banks are Lakshmi Vilas Bank, Karur Vysya Bank, and City Union Bank. The second type of banks includes the New Generation Private Sector Banks. These are banks that received a licence after India’s liberalisation policy was formulated. Some of these banks are HDFC Bank, ICICI Bank, and Axis Bank.

Following liberalisation, the banking industry in India has seen a significant transformation as a result of the establishment of private sector banks, whose presence has been steadily growing and which now offer a varied variety of goods and services to their consumers. Some banks owned by private corporations are mentioned below:

1. Axis Bank
2. Bandhan Bank
3. City Union Bank
4. CSB Bank
5. DCB Bank
6. Dhanlaxmi Bank
7. Federal Bank
8. HDFC Bank
9. ICICI Bank
10. IDBI bank
11. IDFC First Bank
12. Indusind Bank
13. J&K Bank
14. Karnataka Bank
15. South Indian Bank
16. Kotak Mahindra Bank
17. Karur Vysya Bank
18. Nainital Bank
19. RBL Bank
20. Yes Bank

Difference between Public and Private Sector Banks

• Public sector banks are those in which the government owns the majority of the stock. Private sector banks, on the other hand, are the ones with the most individual and institutional shareholders.
• For customers, charges differ considerably depending on which bank they have an account in. Generally, public banks tend to be more affordable than private sector banks.
• In India, there are currently 27 public sector banks, 22 private sector banks, and four local area private banks.
• Public sector banks have a total market share of 72.9% in India’s banking system, followed by private sector banks with 19.7%.
• Because public sector banks have been around for a long time while private sector banks have only been around for a few decades, public sector banks have a larger client base than private sector banks.
• The public sector exemplifies transparency when it comes to interest rate policies, while the Public sector banks give somewhat greater interest rates on deposits to their clients than private sector banks.
• When it comes to staff promotions, public sector banks use seniority as a starting point. In contrast, private sector banks promote people based on merit.
• When it comes to expansion potential, public sector banks are far slower than private sector banks.
• In a public sector bank, job security is always present, but in a private sector bank, job security is only present when performance is high because performance is everything in the private sector.
• Aside from employment stability, another advantage of working for a public sector bank is the after-retirement benefit or pension. Private sector banks, on the other hand, do not offer pension plans to their workers, although they provide additional retirement perks such as gratuity and so on.

Conclusion

The reserve bank of India is the top bank and the authority of the banking and financial services in India. There are two types of banks in the Indian banking system. Public sector bank whose maximum ownership is of the government, while the other is a Private sector bank whose maximum ownership belongs to an individual or private corporation. There are several differences between public and private sector banks, such as interest rates and employment stability. Additionally, charges differ considerably for account holders in public banks and private sector banks.