Difference Between Public Sector and Private Sector Banks (With Table)

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

Public Sector vs Private Sector Banks

The main difference between Public Sector and Private Sector Banks is that Public sector banks are the banks owned more than 50% by the government, while individuals or business entities own private sector banks’ most of the shares. Public sector bank offers a pension, but the private sector bank does not offer a pension.

The public bank gives promotion based on seniority, whereas private bank gives promotion based on performance.

Comparison Table Between the Public Sector and Private Sector Banks

Parameter of Comparison

Public Sector Banks

Private Sector Banks

Status of control

They are government-controlled

They are under private individual control

Interest rates

They 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


Financial institutions with a maximum of its shares contained by the government

Financial institutions with a maximum of its shares held by private shareholders

Customer base

Most public sector or government banks benefit from a more extensive customer base. It is mainly because people find these banks trustworthy

Majority of the private sector banks experience lesser customer base. People fail to trust such banks with their finances fully

Employee promotion status

Usually, the basis of employee promotion is on seniority, or the time-length experienced by the employee at the institution

The foundation of employee promotion is generally on the amount of value added by the individual to the institution

What are Public Sector Banks?

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

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 funds security.

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

What are Private Sector Banks?

The banks in this category have a larger 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 shut down their entire operations abruptly, and lose track with their customers.

In such instances, customers may lose their savings.

These institutions typically adopt aggressive customer strategies, targeted towards ultimate customer satisfaction. They mostly aim at quality service delivery, within the shortest possible time.

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

Main Differences Between Public and Private Sector Banks

  1. Public sector banks exist for a long time now. They have a great public image which creates trustworthiness. In return, these institutions receive customer loyalty, which contributes to their broader customer base. Contrary, the private sector banks now exist for a shorter period. Thus, they have a lower customer base.
  2. With regards to interest rates policies, there is transparency in public sector banks. However, the interest rates on savings for customers are quite 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 usually give lower customer interests on savings.
  3. Public sector banks usually have job security for its employees. When individuals start working in such institutions, they do not have to worry about being fired from a job due to specific issues. For private sector banks, there is usually constant performance evaluation, which adds on to the constant worries regarding job security. In the case where an individual fails to meet certain performance levels, they may easily undergo retrenchment.
  4. The government banks normally take time to implement new technologies that usually make work easier for both the employees and customers. However, the private sectors stay up-to-date for the latest technological trends that make operations easier. Sometimes when you visit the 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 that you need at only one desk. You henceforth achieve satisfaction and save time as well.

Frequently Asked Questions (FAQ) About Public Sector and Private Sector Banks

Which is Better Private or Public Sector Bank?

In order to determine which bank is better than the other, a number of factors have to be considered. Both banks have pros and cons and it’s really up to a client or bank employee to determine the best fit in terms of the offerings from both banks.

Some of the factors include interest rates on loans, fees, and charges, accessibility, the safety of deposits in case the bank is in financial turmoil, job security for employees and other factors.

As far as clients are concerned, public banks tend to have better interests in loans and no hidden charges. Private banks tend to impose higher fees and levies on the loans in order to cover their operation costs.

However, when it comes to disbursement of loans, private banks are much better as compared to their counterparts. In a majority of cases, private banks give out pre-approved loans which lessen the paperwork required, therefore reducing the turnaround time.
Also, private banks are much better at adopting new technology and providing better customer service.

Private banks have dedicated customer service agents who expedite any issues and provide the best banking experience. Employees in public banks are not very motivated to provide such services since they have better job security.

It’s really a game of balancing the pros and cons of the two types of banks and choosing the most appropriate one that serves your needs.

What are the Advantages of Public Sector Banks Over Private Sector Banks?

Public banks have several advantages over private banks. The following are some of the advantages:

1) Interest Rates
The first consideration that comes into play when taking a loan is the bank’s interest rate. Private banks generally charge higher interest rates as compared to public sector banks.

2) Charges and Fees
Coupled with a loan’s interest rate, other charges levied by banks make a difference to cash flows. Such fees include prepayment charges, loan processing fees, etc. Public sector banks usually charge lower additional fees compared to their private counterparts.

This may be attributed to the high overhead costs private banks incur in the form of high salaries, rent, and other costs.

3) Accessibility
Despite technological advancements in internet and mobile-based banking, many customers still visit banks to do any transaction. Public banks have a wider penetration in terms of branches as compared to private banks.
It is therefore convenient and easier to find a public bank in a neighborhood as compared to finding a private one.

4) Safety of money
Public sector banks are quite safe and people who have money in savings accounts or fixed deposits do not have to worry about the banks defaulting.

The government can bail the banks out in case of any financial stresses.


Private bank sectors are commonly known for their technological supremacy and increased competitive position.

Thus, there is always a tough competition base for employees working in such institutions.

Since the private banks keep targeting higher sales and increased profit margins, employee requirements for meeting specific targets and deadlines are fundamental. Also, performance levels should not drop consistently below certain levels.

There are also significant rewards for excellent performances and risk measures. As an individual climbs up the job levels to higher positions, remunerations also increase.

However, employees will mostly work with uncertainty due to the unpredictable future status of their work.

There is usually less competition for public bank professionals. Employees do not focus too much on meeting individual targets or being the best employee in specific departments.

However, these institutions stress upon continuous provision of appropriate training to their various personnel.

The ultimate goal for public sector banks is to attain constant knowledge and skills betterment for improved long-term performance. Therefore, public bank sectors make it possible for employees to build on quality and long-term profession.

Henceforth, most people will prefer working in a low-salaried public bank sector, yet with job security and future certainty. Moreover, governmental banks contain better organizational structures and more in-depth customer base penetration.


  1. https://mpra.ub.uni-muenchen.de/id/eprint/36959
  2. https://www.jstor.org/stable/4414806