The banking sector in India has experienced exponential growth and developments throughout the years. Because of the lucrative deals that the industry offers, individuals looking to save and store their money are having a challenging time choosing between the private or public sector banks available in the country. Not to mention, there are numerous banking institutions to choose from in each category.
Due to the numerous options available, people can feel overwhelmed by the choice between private and public sector banks. They can even encounter helpful information that can make or break their decision. If you are one of these people looking to grow and store your hard-earned money, chances are you’re on the lookout for the best banking sectors and what they offer.
In this nifty guide, we’ll be offering you in-depth insights into the workings of a private or public sector bank. Interested to learn more about these sectors? Take a look below.
What Is A Private Sector Bank?
A private sector bank is a type of financial banking institution whose shares and equities are mainly controlled by private citizens and businesses. Corporations and other similar institutions are also privy to this type of system. Their fresher offerings and enhanced features – such as faster processing and applications as well as great customer services – seems to be their edge in the competition.
Because of their competitive offerings and lengthy list of services, private banking institutions have relatively higher interest rates and charges compared to those in the public sector.
What Is A Public Sector Bank?
On the other hand, the public sector bank comprises around 72.9% of the total bank market. A public sector bank is a type of financial institution where the government holds the majority of shares or equities. There are two main categories, namely the Nationalised Bank and the State Bank and its associates. In this type of system, the government of India usually holds more than 50% of the shares.
Unlike privately-owned institutions, government banks provide relatively lower fees and rates. The main features of these banks are their low processing fees as well as fast interest rate reductions. Moreover, these establishments also offer fewer charges and rates, such as eliminating pre-payment charges and period restrictions.
Factors To Consider
One of the most common factors that help individuals decide is the bank’s interest rates. Though the rates are similar to one another, new-age private banks such as Bandhan Bank and Airtel Bank are churning out more enviable and inviting interest rates. Meanwhile, interest rates levied on loans are lower.
In terms of fees and charges, private sector banks are generally preferred by younger generations. This is primarily because the services received by these individuals are better, despite the extra fees that come with them. Meanwhile, government banks, or the public sector banks, are preferred by those who are willing to compromise on the service and product offerings, especially as the fees and charges are lower.
Another factor that you should bear in mind prior to making a decision is the customer base of these institutions. Public sector banks are generally geared towards employees working in the government. Since the government is already a majority stakeholder in these establishments, they can easily set up salary accounts for their workers, as well as fixed deposits, lockers, and other available accounts. Because their establishment date is far longer than competitors in the private sector banking, banks in the public sector tend to have a wider customer base. This is because they have gained the trust of the public over time.
However, the private sector bank in India still commands a relatively high customer base, particularly for corporations and companies and those who are keen on getting credit cards and internet banking services.
Performance-wise, private sector banks are seeing a boost in their financial assets and offers, while public sector banks have reported record losses.
The Bottom Line
Now that you know the main characteristics of public and private sector banks, you can weigh the pros and cons of doing your business in these banks. What do you think is best for your needs?