Difference Between Public sector Vs Private Sector Bank |Meaning ,Advantages & Disadvantages
The Reserve Bank of India is the apex bank and the monetary authority, which regulates the banking system of the country. It is the banker’s bank, it governs all the banks of the country, like cooperative banks, commercial banks and development banks. The commercial bank includes public sector banks, private sector bank, foreign bank, regional rural bank, local area banks, etc. Before 1969, except eight banks (SBI and seven associate banks), all the banks in India were private sector banks after which 14 commercial banks got nationalized in July 1969 and 6 in 1980.
What is Public Sector Bank ?
Public sector banks are those banks where the government holds more than 50% ownership. With these banks, the government regulates the financial guidelines. Because of government ownership, most depositors believe that their money is more secured in public sector banks. As a result, most public sector banks have a large customer base.
For example, The State bank of India (SBI) is the largest public sector bank in India. In this bank, the Indian government holds more than 63% share. A large part of the remaining share is also traded in the Indian stock market.
Relative to other banks, the employees of public sector banks enjoy more job security. They also enjoy other perks like pension after retirement. For this reason, many of these employees are reluctant to give their best service. As a result, the rate of loan defaulter is much higher in public sector banks. The promotion in the public sector banks is based on seniority, which de-motivate many employees.
Advantages of Public Sector Bank
Here are some advantages customers get from public sector banks.
- High-interest rate on deposits
- Low-interest charge on loans
- Employees get full job security
- These employees also get a pension after retirement
- Offer service to a large customer base
- Offer their service to the rural part of the nation
- Offer financial service through multiple branches
Disadvantages of Public Sector Bank.
Here are some disadvantages associated with public sector banks.
- The big bureaucratic system at the management level
- Inability to a big financial decision quickly
- Offer less customized service to the customers
- Too many complaints against the employees for their poor service
- Most public sector banks are suffering from big corruption scandals
- High defaulter rate from the customer
- Public sector banks spend lots of money on financial operation
What is Private Sector Bank ?
Private Sector Banks: In these banks, most of the equity is owned by private bodies, corporations, institutions or individuals rather than government. These banks are managed and controlled by private promoters.
Advantages of Private Sector Bank
Here are some advantages that are associated with private sector banks.
- Private Sector Banks offer quick service to the customers.
- These banks also offer customized services according to the customer’s financial needs.
- Private Sector Banks has a streamlined management system.
- Quick financial decision making is possible in private sector banks
Disadvantages of Private Sector Bank
Here are some common disadvantages of private sector banks.
- Private Sector Banks charge extra on every financial service.
- These banks only operate in cities and out of reach for the rural population.
- Private Sector Banks offer no job security to the employees.