Difference Between Public Sector and Private Sector Banks

Before opening a bank account, many people wonder whether they must open it with a public bank or a private bank. Private banks generally offer faster loan approvals but often come with higher interest rates. Public banks offer loan approvals with lower interest rates but getting loan approval can sometimes be a pain in the neck since the process is typically slower. 

Both public and private sector banks have advantages and drawbacks. To know whether a public or private bank would be suitable for you, you must learn about the difference between Public Sector and Private Sector Banks. You must carefully evaluate all the pros and cons to make the right decision.

What is a Public Sector Bank?

Public sector banks are banks wherein 50% of the stakes are held by the Ministry of Finance of the Government of India or State Ministry of Finance of any of the various Indian State Governments. 

These banks’ shares are typically listed on stock exchanges. All the financial guidelines of public sector banks are formulated by the Indian government. The market share of public sector banks is more than 70% in the Indian banking industry. 

Public sector banks are divided into two categories, namely, nationalized banks and state banks and their affiliates. In India, there are 12 public sector banks. 

Advantages of Public Sector Banks

The benefits and advantages of public sector banks include the following:

• The public banks generally charge low interest on loans.

• They offer high-interest rates on deposits.

• Public sector banks offer full job security to those working for them.

• They offer financial services through multiple branches spread across India.

• They provide financial products and services to communities in rural areas as well.

List of Public Sector Banks in India

The list of public banks in India is as follows:

What is a Private Sector Bank?

Private Sector Banks are those banks whose stakes are owned and operated by private individuals or corporations, rather than the Central Government or State Government. The objective of private sector banks is to make profits for their shareholders.

Private sector banks play an important role in the banking industry by providing a wide range of banking and financial services. They compete with the public sector banks in India. HDFC Bank, which is the largest bank in India, and the fourth largest bank in the world, is a private sector bank. 

Although private sector banks are owned by private companies or individuals, they must still follow the rules and regulations stipulated by the Government of India and the Reserve Bank of India (RBI). 

Advantages of Private Sector Banks

Some key advantages of private banks include the following:

• Private sector banks provide quick services to the customers.

• Their management system is generally streamlined and they provide state-of-the-art customer services.

• They offer customized services to customers based on their financial requirements.

• They generally make quick financial decisions, such as for loan approval. 

• They offer attractive salaries, incentives and other perks to their employees.

List of Private Sector Banks in India

The list of private banks in India is as follows:

Public Sector vs Private Sector Banks: Comparison

In the table below, we will compare public sector vs private sector banks.

Conclusion

The main difference between public sector banks and private sector banks is that the former banks are owned by the Government while the latter banks are owned by private companies or individuals. Some popular public sector banks include SBI Bank, Union Bank of India and Bank of India. On the other hand, some popular private sector banks include HDFC Bank, South Indian Bank, Federal Bank and Bandhan Bank. 

Frequently Asked Questions (FAQs)

Q1. What is the difference between public sector and private sector banks?

A. The public sector banks are owned by the government, whereas private sector banks are owned by private companies or individuals. 

Q2. Which bank is the largest bank in India?

A. The largest bank in India by market cap is HDFC Bank.

Q3. Which bank is the oldest bank in India that is still in operation?

A. Established in 1806, the State Bank of India (SBI) is the oldest bank in India that is still in operation. 

Q4. What was the State Bank of India originally known as?

A. When the State Bank was established, it was originally known as the Bank of Calcutta. 

Q5. Which bank became the first private sector bank to be established in India?

A. IndusInd Bank was the first private sector bank in India. It was established by SP Hinduja in 1994.

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.