Public sector banks are those where majority of the power in the bank is of the government. Majority is held by shareholders of the bank in private sector banks.
SBI is a private sector bank and ICICI is a public sector bank. We have posted detail list of Best Banks in India, Do check out.
Both the private sector and public sectors gives same services to the people, however charges differ and also the quality and the duration of time for the services provided. There is also the difference between interest rates.
Public Sector Banks
Public segment bank is a bank in which the government holds a major power of the shares. Usually, in public sector banks, government holdings are more than 50 per cent.
Public sector banks are classified into two categories further-
- Nationalized Banks
- State Bank and its Associates.
In the banks that are nationally working, the government control and regulates the featuring of the banking entity.
Although, the government keeps decreasing the power in PSU banks as and when they sell shares. So to that extent they can also become minority shareholders in these banks.
These as their peers are listed on the Indian bourses.
Private Sector Banks
In the private banks, most of the fairness is owned by private bodies, corporations, institutions or individuals rather than government. Private sectors manage and control these banks.
Post-removal in the 1990s, banks such as ICICI, HDFC which got the license are the new age Private sector banks. They unpaid to their improved service offerings give a tough competition to the players in the public sector.
All over the India of the total banking services, Public sector banks constitute 72.9% share while the rest is covered by private players. The number of banks all over are 27 public sector banks whereas 22 private sector banks.
As part of its differentiated banking government, the main banking body has given license to Payments Bank and Small Finance Banks or SFBs. This is a try to destroy the government’s Financial Inclusion drive.
In terms of financial performance, PSU banks lag behind. When comparing most of the functions like non-performing assets or NPA and net interest margins, private sector banks tend to be much better placed.
Many banks like Bank of Baroda have recorded losses. Losses from the steel sector have circumstances that are non-performing assets of the public sector banks in India. Share prices of these banks are also on a higher side.
Another important reason is that in terms of enough capital as well, public sector banks are lagging behind, their private sector banking peers.
Recently the government of India has decided to fill fresh capital in some of the government owned banks such that they are solvent and at the same time are fully amenable.
An infusion to the tune of Rs. 10,000 crore is earmarked for the sector in the F.Y 2017-18 and 2018-19.
It is wished that there would be some recovery in the losses and the public sector banks would be able to compete with the private sector banks in India.
Difference Between Private Banks & Public Sector Banks
The main differentiation between private and public sector banks are:
a) In a public sector bank more than fifty percentage of the stake is held by the Government.
b) In a private sector majority of the power is owned to private shareholders, including corporations and individuals.
- Interest Rate
Deposit interest rates that are given by public sector banks are almost the same when compared to private sector banks.
In case of loans, interest rates are comparatively lower as for example SBI introduced a new home loan offering for its women customers with an interest rate of 8.35% for a ticket size of up to Rs. 30 lakhs.
- Fees & Service
Private Sector Banks is being popular in providing better service, however, they charge for the extra services provided by them.
The fees and charges of public sector are less comparatively such as on balance maintenance. A lot of public sector banks are still picking up in their service offerings.
- Customer Base
Mostly bank accounts in public sector are opened for government employees for their salaries, fixed deposits, lockers etc. There ratio of customers is also relatively large when compared with their peers in the private sector as they have been in the domain for long and have managed to gain customer’s confidence.
Comparatively private sector bank in India target company employees, for their salary accounts, credit cards and net banking.