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Difference between the public sector and private sector banks

The Reserve Bank of India is the main bank and the monetary authority, which regulates the banking system of the country. It is the bank, governs all the banks of the country, such as cooperative banks, commercial banks and development banks. The commercial bank includes public sector banks, private sector banks, foreign banks, regional rural banks, local area banks, etc. Before 1969, except for eight banks (SBI and seven associated banks), all banks in India were private sector banks, after which 14 commercial banks were nationalized in July 1969 and 6 in 1980.

In addition, in the year 1993, the liberalization policy was introduced, after which private banks entered the scene.

Today, the two categories of banks are working well in the sector by providing notable facilities and services to their customers. But, you can see stiff competition between the public sector and private sector banks. So, here we have discussed the differences between the Public Sector and Private Sector Banks.

Comparative graph

Basis for comparison Bank of the public sector Bank of the private sector
Sense Public Sector Banks are banks whose full or maximum ownership corresponds to the government. Private Sector Banks refer to banks whose majority participation is in the hands of individuals and corporations.
No. of banks 27 22
Share in the banking industry. 72.9% 19.7%
Customer base Big Relatively small
Interest rate on deposits Tall Marginally inferior
Promotion Based on age Based on mrito
Growth opportunities Low Comparatively high
Job security Always present Purely based on performance.
Pensin S No

Definition of public sector bank

Public Sector Banks are banks whose participation of more than 50% corresponds to the central or state government. These banks are publicly traded. In the Banking System of India, PSBs are the largest category of banks and emanated before independence.

More than 70% of the market share in the Indian Banking sector is dominated by public sector banks. These banks are generally classified into two groups, that is, Nationalized Bank and State Bank and their associates. There are 27 public sector banks in India, which differ in size. Of these, there are a total of 19 nationalized banks in India, while 8 State Bank of India Associates.

Almost all PSBs share the same business model, organizational structure and human resources policies. Therefore, competition can be seen among these banks, in the market segment they serve.

Definition of private sector bank

Banks whose majority of the assets are held by private shareholders and entities, instead of the government, are known as private sector banks. After most of the banks were nationalized in the two tranches, the non-nationalized banks continued their operations, known as Private Sector Banks of Old Generation. In addition, when the liberalization policy is launched in India, the banks that obtained a license such as the HDFC bank, the ICICI bank, the Axis bank, etc. they are considered banks of the private sector of new generation.

After liberalization, the banking sector in India has undergone a dramatic change due to the appearance of private sector banks, as its presence has been constantly increasing, offering a wide range of products and services to its customers. They raised a tough competition in the economy.

Key differences between the public sector and the private sector bank

The points below explain the differences between public and private sector banks:

  1. The public sector banks are banks, whose maximum participation is with the government. On the other hand, Private Sector Banks are those whose maximum participation is with individuals and institutions.
  2. Currently, there are 27 public sector banks in India, while there are 22 private sector banks and four private banks in the local area.
  3. Public sector banks dominate the banking system of India, with a total market share of 72.9%, followed by private sector banks, with 19.7%.
  4. Public sector banks have been established for a long time, while private sector banks emerged a few decades ago, so the customer base of public sector banks is larger than private ones.
  5. Transparency in terms of interest rate policies can be seen in the public sector. The interest rate on deposits offered by public sector banks to their clients is slightly higher than that of private sector banks.
  6. When it comes to employee promotion, public sector banks consider antiquity as a base. On the contrary, mrito is the basis of private sector banks, to promote employees.
  7. If we talk about growth opportunities in a public sector, banks are quite slow compared to private sector banks.
  8. Workplace safety is always present in a public sector bank, but work in the private sector bank is safe only when the performance is good because the performance is all in a private sector.
  9. Along with job security, another of the public sector banks is the benefit after retirement, that is, the pension. On the contrary, the pension plan is not provided by private sector banks to their employees. However, the bank offers other retirement benefits such as tips, etc.


Whether you want to invest your money or make a career in the banking sector, due to ruthless competition, people have to think more than 100 times, before resorting to either. However, each individual has certain priorities, and one can easily choose between the two, by programming their preferences and going for the one that best suits them.