What are the Differences Between a Private Bank and A Public Bank?

The central and authority bank of India is the RBI or the Reserve bank of India. It governs all the other public and private banks and sets the economic/banking regulations that have to be followed by them.

Broadly speaking, the banks can of two types- public and private.

Public Bank

A public bank is a bank in which the central or state government holds more than 50% of the equity. Thus, it’s the government that has the authority on the decisions taken.

Some examples of public sector banks include- State Bank of India (in which the government has 62.22% stake) and Punjab National Bank (in which the government has 58.87% stake).

More than 70% of the Indian banks are public sector banks and almost all of these follow the same business model and HR policies.

Private Bank

The banks in which the government holds less than 50% share are called the private banks. Hence, in these banks, usually, the private shareholders have the authority to make the decisions. Some examples include HDFC bank (in which the HDFC group holds 21.57% equity) and ICICI Bank (in which ICICI owns 46% equity).

The interest rates of private banks are slightly higher than public sector banks. They also tend to have stringent usage policies and regulations. However, they make up for these with high-class service and customer support.

There are numerous private and public sector banks in India due to which there is always neck-to-neck competition between them. However, since lately payments banks such as Paytm are also emerging and the competition is likely to increase even further.

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