Banking In India

What are Public and Private Sector Banks?

By October 14, 2022 No Comments

The public sector, which makes up a percentage of the nation’s overall economy, is under the jurisdiction of the government or other governmental agencies. The term “private sector” refers to the area of the nation’s economy that is run by people or private businesses. Ipb one of the best banking training institute, will let you know more about what is public and private sector banks

What are public and private sectors banks?

Banks classified as public sector banks are those in which the federal or state governments hold a majority stake. Private sector banks are those whose stock is primarily owned by private companies or individuals. Public sector banks are established through parliamentary acts. There are currently 34 nationalised banks in India, including 12 government-owned institutions and 22 private banks.

Private Banks V/S Public Sector banks: conceptual distinctions

Private Banks

Private sector banks are renowned for their cutting-edge technology and strong competition. Private banking careers are consequently more competitive, with individuals being required to meet rigorous goals and outperform expectations in order to advance their careers. Although income may be higher and the risk-to-reward ratio is also higher, the job security may not be as robust as it is at publicly held institutions.

Education Requirements: A bachelor’s degree in economics, business, or finance is typically enough to provide a strong basis for a career in banking. The majority of private banks will demand an MBA from a recognised university in addition to a bachelor’s degree in one of these subjects. They prefer to hire new people through campus recruitment, referrals, and walk-ins through consultants rather than relying on newspaper advertisements. They might or might not be posted, though, depending on how many positions are available. They are not compelled to adhere to reservation policies that mandate allocating a set number of positions to predetermined groups of people. Private banks are looking for young, competitive people that enjoy working under pressure and think it’s important to give it their all.
Employment: A diversified customer base is served by private sector banks’ high-end services, which are delivered while maximising technical capabilities. In order to capitalise on their capacity to deliver high-quality services in the shortest amount of time, private banks commonly use aggressive client engagement strategies.

Public Banks

Public sector banks are renowned for having a larger customer base and a more organized management structure. The work environment is also less competitive than at private banks, and employees are less likely to be concerned with achieving goals and providing the best performance on a team.
A greater emphasis is typically placed on providing suitable training to employees in order to assist them in updating their knowledge and skills in order to improve their performance over time. Job security is significantly better in public sector banks than in private sector banks, and for some people, this may be the most crucial aspect of building a long-term career.

Required education– Candidates are picked after clearing a set of common admission tests offered by public sector banks. Any graduate can work in banking for the government. Candidates for the position of public banker should be well-versed in accounting, finance, and banking procedures and possess excellent verbal and written communication abilities.

Although the requirements are less strict than those of private banks, one still needs to pass the test. They are constrained by particular state-imposed rules and constraints when it comes to employment because they are government-owned financial institutions. Any job openings must typically be advertised in prominent periodicals, and the number of posts reserved for members of underrepresented groups in society is determined by reservation criteria.

Employment– As the government continues to extend the scope and reach of publicly-owned banks to the most remote regions of the country, there is a growing need for banking experts. However, a much bigger number of people apply for a relatively small number of positions, boosting competition, because of the increased benefits and employment security provided. For instance, 40 lakh applications were made in 2013 for 80,000 positions in government banks. Despite all of the alleged advantages of a career in public banking, getting through the exam might be challenging.

Important distinctions between public and private sector banks

The following details the distinctions between banks in the public and private sectors:

  • Public sector banks are those in which the government holds the majority of the stock. On the other side, private sector banks are the ones where people and institutions hold the most percentage of the stock.
  • India now has 27 public sector banks, compared to 22 private sector banks and 4 neighborhood private banks.
  • Public sector banks hold a total market share of 72.9% in the Indian banking system, followed by private sector banks with a share of 19.7%
  • Public sector banks have been around for a while, whereas private sector banks only started to appear a few decades ago. As a result, the public sector banks have a larger customer base than the private ones.
  • The public sector has an interest rate policy that is transparent. The public sector banks give slightly higher interest rates on deposits to its clients than do the private sector banks.
  • Public sector banks use seniority as a starting point when promoting personnel. In contrast, private sector banks promote people based on merit.
  • If we compare public sector banks to private sector banks, the public sector banks’ development potential are far slower.
    In a public sector bank, job security is always present, but in a private sector bank, performance is everything, so job security is only present when performance is good.
  • Another perk of working for a public sector bank, in addition to employment stability, is the pension. Contrarily, private sector banks do not offer pension plans to its staff. The bank does, however, provide additional retirement benefits, such as gratuities and so like.

Conclusion

Whether, you want to invest your money or you want to make a career in banking sector, due to the ruthless competition, people have to think more than 100 times, before coming down to any one of the two. However, every individual has certain priorities, and one can easily choose between the two, by scheduling down their preferences and going for the one, that suits best.