Difference Between Public Sector and Private Sector Banks in India

In India, the banking sector plays an important role in the economic development of India. Banks are like hubs where people save, borrow, and manage their money. They help individuals, businesses, and the government by providing financial services such as loans, Deposit accounts, and investment options.  There are mainly two types of banks in India - public sector banks and private sector banks. 

Both types of banks play important roles in India's financial system, but they have different ways of working and offer different advantages. To learn the difference between public and private sector banks in detail go through this guide.

What is the Public Sector Bank in India?

Public sector banks are those where the government, either at the state or central level, owns more than half of the stocks. These banks are traded publicly, and the government sets all the financial rules for them. They are the biggest banks in India and have been in India before independence. Public sector banks are divided into two categories: nationalised banks and state banks with their affiliates. 

The State Bank of India is the largest public sector bank in India. Currently, the Indian banking system comprises 12 public sector banks. The market share of Public Sector Banks in terms of deposit is 59%, according to Financial Year 2017-18 data of Reserve Bank of India. 

What is a Private Sector Bank in India?

Private sector banks are those owned by private companies or individuals. Even though they're privately owned, they have to follow the rules set by the Central Bank. These banks offer good services and are efficient. While they provide excellent services, there might be extra costs involved.

Some of these banks were introduced during the nationalisation of major banks but stayed private due to their small size or other reasons. Karur Vysya Bank, Lakshmi Vilas Bank, and City Union Bank are examples of these types of banks. Another type is the New Generation Private Sector Banks, which got their licence after India's liberalisation policy. HDFC Bank, ICICI Bank, and Axis Bank are among these banks. In India, currently, there are 21 private sector banks. The market share of Private Sector Banks in terms of deposit is 34%, according to Financial Year 2017-18 data of Reserve Bank of India. 

Public and Private Sector Banks Examples in India

The following are some examples of public sector banks in India:

1. State Bank of India 
2. Central Bank of India 
3. Union Bank of India 
4. Indian Bank 
5. UCO Bank 
6. Bank of Maharashtra 
7. Canara Bank 
8. Bank of Baroda 
9. Punjab National Bank 
10. Punjab & Sind Bank 

The following are some examples of private sector banks in India:

1. Axis Bank
2. HDFC Bank
3. IndusInd Bank
4. ICICI Bank
5. Kotak Mahindra Bank
6. Bandhan Bank
7. IDFC First Bank
8. IDBI Bank
9. Karur Vysya Bank
10. City Union Bank

Benefits of Public Sector Banks in India

Here are the advantages of public sector banks in India:

• Public sector banks are usually present in remote areas, extending their services to regions that are geographically distant or less accessible.
• These banks are backed by the government which makes you feel secure about your money and investments.
• Public sector banks often offer loans at competitive rates, making credit more accessible.
• Actively involved in social welfare, these banks dedicate a significant portion of their lending to sectors like agriculture and MSMEs, contributing to the overall economy.
• Public sector banks demonstrate stability during economic downturns due to government ownership and regulations, safeguarding depositor interests.
• Since this bank prioritises customer service, it ensures efficient and satisfactory banking experiences for a diverse range of customers.

Benefits of Private Sector Banks in India

By investing in private sector banks in India, you enjoy the following benefits:

• Private banks offer fast service to customers, ensuring quick transactions and responses to queries.
• These banks tailor their services to meet your specific financial needs, providing personalised solutions.
• Private banking opens doors to unique investment opportunities and financial products that are not readily available to the public.
• These banks are known for making prompt financial decisions, allowing for swift actions when needed.
• Private sector banks have efficient management systems in place, ensuring smooth operations and decision-making processes.

Key Difference Between Public Sector and Private Sector Banks

The following table provides a comparison between public sector banks vs private sector banks in India: