What is Private Sector Bank? | Definition, Working, Pros and Cons

The bank is the most trusted financial institution among the public. This institution fulfils all our financial needs. Anyone can open an account in a bank and do all of their financial activity from there. This institution helps everyone save money, do financial transactions, and get a loan for various financial requirements. However, all banks are not the same. According to their stakeholders, a bank can be categorized into two categories. One of them is private sector banks. These banks operate in another way. Let’s learn how private sector banks work and what are the advantages and disadvantages associated with it.

How does it work?

Private sector banks are those banks, where private individuals or private companies own a major part of the bank’s equity. Even though these banks follow the nation’s central bank’s guidelines, but they can formulate their independent financial strategy for the customers. A large part of these banks are traded on the stock market and anyone can buy a significant part of these bank’s shares from the stock market.

Most private sector banks are very agile in their financial strategy. These privates can make a quick financial decision according to the market condition. For this reason, interest rates fluctuate quickly on both deposits and loans. They offer very reliable services to the customers. They also offer various customized services to the customer to fulfil their individual financial needs. There is no job security in private banks. Most employees work very hard to satisfy the customer’s financial requirements. In these banks, the employees get promotions on their merit and performance.

However, private sector banks charge a little extra for their financial services. Compared to other banks, the interest rate on deposits is low in most private sector banks. Even though getting a loan in the private banks is very easy, but they charge more interest on these loans. Axis Bank is one of the best examples of private sector banks in India. This bank is very competitive and offers the best services to its customers

Advantages of Private Sector Bank

Many people believe private sector banks are the best. In their opinion, more banks should take the approach of private sector banks and make the banking system more robust for the public. Here are some advantages that are associated with private sector banks.

  1. Private Sector Banks offer quick service to the customers.
  2. These banks also offer customized services according to the customer’s financial needs.
  3. Private Sector Banks has a streamlined management system.
  4. Quick financial decision making is possible in private sector banks.
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Disadvantages of Private Sector Bank

However, everything is not ok with private sector banks. These banks also lag in different parts. For this reason, many people do not use private sector banks. Here are some common disadvantages of private sector banks.

  1. Private Sector Banks charge extra on every financial service.
  2. These banks only operate in cities and out of reach for the rural population.
  3. Private Sector Banks offer no job security to the employees.