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Public Sector Banks and Private Sector Banks

Public Sector Banks

Public sector banks are the ones in which the government has a major holding. They are divided into two groups i.e. Nationalized Banks and State Bank of India and its associates. Among them, there are 19 nationalized banks and 8 State Bank of India associates. Public Sector Banks dominates in deposits received and advances to the public in the banking industry

Private Sector Banks

Private sector banks came into existence to supplement the performance of Public sector banks and serve the requirements of the economy better. As the public sector banks were merely in the hands of the government, banks had no incentive to make profits and improve the financial health. Nationalization killed and muted competition in banking. Banks operated in regulatory environment with administered rate of interest structure, quantitative restrictions on credit flows, high reserve requirements and significant proportion of lendable resources going to the priority and government sectors. This resulted in low levels of investment and growth, decline in productivity and erosion of profitability of banking sector. Thus in 1991 Narasimham Committee-I which recommended the free entry of new banks in the financial market provided they confirm the minimum startup capital and other requirements by the authorization of Reserve Bank of India. Following are the different types of private sector banks in India.

  • Old generation private banks
  • New generation private banks
  • Foreign banks operating in India
  • Scheduled co-operative banks
  • Non-scheduled banks

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Deposits and Bank Accounts
Fixed deposits