Public Sector vs Private Sector Banks: Difference and Comparison

When you reach out to any bank to open a saving or current account, you will find that there are two types of banks, viz public and private banks.

Key Takeaways

  1. The government owns and controls public sector banks, whereas private entities or individuals own private sector banks.
  2. Private sector banks generally have more competitive services and interest rates, while public sector banks provide more accessible banking options for rural and low-income populations.
  3. Public sector banks focus more on financial inclusion, while private sector banks prioritize profit and shareholder value.

Public Sector vs Private Sector Banks

A public sector bank is a financial institution in which the state government owns over 50% of their shares and they are totally controlled by the government. Private Sector Banks are those financial institutions that are owned by individuals who have over more than 50% of their shares.

Public Sector vs Private Sector Banks

Public bank gives promotion based on seniority, whereas private bank gives promotion based on performance.

Comparison Table

Parameter of ComparisonPublic Sector BanksPrivate Sector Banks
Status of controlThey are government-controlledThey are under private individual control
Interest ratesThey have higher interest rates for loans and lower interest rates for savings.They have lower interest rates for loans and higher interest rates for savings.
ShareholdingsFinancial institutions with a maximum of its shares contained by the governmentFinancial institutions with a maximum of its shares held by private shareholders
Customer baseMost public sector or government banks benefit from a more extensive customer base. It is mainly because people find these banks trustworthy.The majority of the private sector banks experience a lesser customer base. People fail to trust such banks with their finances fully.
Employee promotion statusUsually, the basis of employee promotion is seniority or the time length experienced by the employee at the institution.The foundation of employee promotion is generally the amount of value added by the individual to the institution

What are Public Sector Banks?

Public sector banks refer to the financial institutions with over 50% of their shareholdings held by the state government. Usually, the banks appear on the stock exchange.


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The business dealing with money and credit is:

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They are the financial backbone of a country, such that they contribute to the nation’s financial security.

Despite slightly higher interest rates, once you keep your money in the governmental banks’ fixed accounts, you are sure of the funds’ security.

There is almost zero chance of such institutions defaulting on customers’ finances. In cases where the banks experience financial constraints, the government tends to cover them up.

Public Sector Bank

What are Private Sector Banks?

The banks in this category have a more significant part of their equity contained by private shareholders rather than the government. These banks have individuals or private institutions holding more than 50% of the shares.

Some private banks may default on customer finances. It happens mainly on fixed deposits.

Others may abruptly shut down their entire operations and lose track of their customers.

In such instances, customers may lose their savings.

These institutions adopt aggressive customer strategies targeted toward ultimate customer satisfaction. They primarily aim at quality service delivery within the shortest possible time.

Employees will consistently market high-end products and services to a broader geographic and a larger target audience.

Private Sector Bank

Main Differences Between Public and Private Sector Banks

  1. Public sector banks have existed for a long time now. They have an excellent public image which creates trustworthiness. In return, these institutions receive customer loyalty, contributing to their broader customer base. Contrary, private sector banks now exist for a shorter period. Thus, they have a lower customer base.
  2. Concerning interest rate policies, there is transparency in public sector banks. However, the interest rates on savings for customers are pretty higher. For the private sector banks, there may be more hidden charges on various operating systems. It explains why most people opt for government banks. However, the banks in this category give lower customer interest on savings.
  3. Public sector banks have job security for their employees. When individuals start working in such institutions, they do not have to worry about being fired from a job due to specific issues. There is constant performance evaluation for private sector banks, which adds to the worries regarding job security. If an individual fails to meet specific performance levels, they may easily undergo retrenchment.
  4. Government banks take time to implement new technologies that make work easier for employees and customers. However, the private sectors stay up-to-date with the latest technological trends that make operations more straightforward. Sometimes when you visit public banks, you have to go through various departments to attain the needed information. However, in most private banks, you can receive all the assistance you need at only one desk. You henceforth achieve satisfaction and save time as well.
Difference Between Public Sector and Private Sector Banks
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