Private sector bank

A brief description of the operations of private sector banks, their advantages and disadvantages.

Banks are one of the safest places to keep money and are known to be one of the most important financial institutions. Banks are known to fulfil the financial needs of the public. They have to open an account with a bank, and their financial record begins from there. Not all banks function under the same principles. The classification of banks involves two categories, Public and Commercial Banks. With time, the private sector banks have also evolved with years of transparency and excellence. Both private and public sector banks provide more options to their customers to make their banking experience pleasant and comfortable. This blog will discuss private sector banks, their operation, and their advantages and disadvantages. 

What is a private sector bank?

The central part of a private bank’s equity is owned by either a group of individuals or private companies. However, they need to adhere to the rules and regulations of the central bank’s guidelines despite having their own set of independent financial strategies. The trading of these banks is done on the stock market. Most private sector banks provide excellent innovative service and efficiency in operations. However, since they are profit-based financial institutions, they provide efficient services at an additional cost.

Commercial Banks became popular in the 1990s when the LPG policy was founded. IndusInd Bank and Axis Bank are among the oldest banks in the private sector in the country. Both were founded between 1993-and 1994 after the government of India permitted them. 

How do private sector banks work?

Commercial Banks involve several functions which differentiate them from public banks, including their services of deposit accounts like savings accounts, which have high-interest rates. However, their primary focus remains on meeting client requirements. Thus, they have flexible financial strategies. In simpler words, private sector banks offer investment planning services. In addition to that, they are known to provide loans at affordable rates.

Furthermore, several banks also help their clients with tax compliance and future risks. Moreover, one can always find a dedicated representative committed to serving the customers. Last but not least, certain private banks also manage the billings and provide cash flow management to clients in added costs.

Advantages of private sector bank

There are several reasons why private sector banks are widely famous among customers in India. The first reason is the swift service provided by a majority of the private banks in India. They are also providing customised financial plans to cater to the needs and requirements of the customers. Private sector banks are known for their efficient management system. Last but not least, private banks are known for providing quick solutions to the decisions taken by the customers. 

Disadvantages of Commercial Banks

Since everything has pros and cons, private sector banks are not an exception. The charges of services provided by private sector banks are very high compared to the free service provided by the public banks. Currently, the majority of the privately-owned banks have branches across the country’s main cities and are relatively inaccessible in rural areas. Last but not least, private sector banks fail to provide job security to their employees. The high management fees of the private banks make it impossible for most people to afford their services.

Conclusion

Banking is one of the most critical financial requirements and services in any country. Currently, India’s banking system consists of two significant categories, public and Commercial Banks. Private sector banks have a group of individuals or private companies which own the majority of the equity of any given bank. Most of the time, private banks have shares in the stock market. In India, the concept of private banks became famous around the 1990s only. There are several reasons to choose a private bank for their financial dealings. The reasons include faster service, easy opening of accounts, dedicated representatives, customised financial plans, etc. There are several disadvantages to opting for financial services from privately owned banks. They include high management costs, availability of the banks only in cities, no job security, and high-interest rates for customers. People choose between public and private banks depending on the type of requirement. People with unique financial requirements prefer private sector banks because of their ability to customise plans and better representation. 

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Frequently asked questions

Get answers to the most common queries related to the Railway Examination Preparation.

What are private sector banks?

Ans. Private sector banks are banks where the majority of the bank’s equ...Read full

What are the functions of Commercial Banks?

Ans: Private sector banks provide an easy opening of deposit accounts such as ...Read full

What are the advantages of private sector banks?

Ans: Along with providing swift and instant services, a privately owned bank has several other advantages. They incl...Read full

What are the disadvantages of private sector banks?

Ans: Private sector banks have certain disadvantages, including their expensive management system and high-interest ...Read full