What is Public Sector Bank?
Public sector banks are the banks run by the government of India. They are the largest category of banks in India.
There are various acts passed by the Parliament of India, like the State Bank of India (Subsidiary Banks) Act, 1959 & Bank nationalization Act (1970, 1980). These acts run the affairs of public sector banks.
In Public Sector banks, the Government of India is the major shareholder. All PSBs come under the purview of the Central Vigilance Commission and RTI Act 2005.
Due to their ownership by the government, Public Sector Banks aims to fulfill the basic economic needs of the country. They are famous for their efficient organizational structure and less competitive work environment. Public sector banks also provide higher job security.
Currently, there are twenty-seven Public Sector banks in India.
There are two categories of public sector banks- 1. Nationalized banks 2. State bank and its associates.
Public sector banks offer comparatively slower services and are known to have a less competitive work environment.
What is Private Sector Bank?
Banks whose major share belongs to the Private shareholders and entities are known as public sector banks.
Since these banks rose just a few decades ago, their customer base is small.
At present, there are 22 Private Sector banks in India. Private banks are registered under the Indian Companies Act, 2013.
Private banks are highly competitive and are keen to work towards maximizing their profit. They offer faster service to their customers. These banks have their selection process like any other private company.
Private sector banks aim to generate maximum profit. They have the liberty to choose the board directors on their own as long as they follow the guidelines laid down by RBI.
Difference Between Public Sector Bank and Private Sector Bank
Public Sector banks account for 72.9% of the total share in the banking industry. Private Sector banks account for 19.7% of the total Share.
Public Sector banks offer a high-interest rate to account deposits made by the public. Private banks have a comparatively lower interest rate on deposits.
Public Sector banks have a higher customer base while private banks have a lower customer base.
Public sector banks are slow in adopting new available technologies. Private sector banks work on quickly adapting to new technologies which improve their productivity.
Only 20% of foreign investment is allowed in Public sector banks. Private sector banks have a higher FDI capital as compared to Public Sector banks.
In public-sector banks, the promotion of employees is based on their seniority; while in private-sector banks, promotion is offered based on merit.
Comparison Between Public Sector Bank and Private Sector Bank
| Parameters of Comparison | Public Sector Bank | Private Sector Bank |
| Definition | The bank where the major shareholder is the Government of India. | Banks whose major share belongs to the private shareholders. |
| Share in the banking industry | 72.9% of the total share | 19.7% of the total Share |
| The interest rate on deposits | High-interest rates | Comparatively low-interest rates |
| Foreign investment | Only 20% of FDI is permitted. | Has high foreign investment. |
| Customer base | Large | Comparatively smaller |
| Developments | They are slow in adopting new available technologies. | They quickly adapt to new technologies which improve their productivity. |
| Advantages to employees | 1. Promotion is based on seniority. 2. Job security is always present. | 1. Promotion is based on merit. 2. Job security depends on your performance. |
| Benefit to customers | Slow in disbursing loans as they demand serious paperwork. | Faster loan disbursement |