The banking system in India plays a significant role in promoting economic growth by efficiently allocating resources. The banking system contributes to the growth of the economy by turning savings into investments and also by the management and efficient mobilization of resources from savers to investors.
In India, banking has been divided into different groups. Each group has their own way of functioning, benefits and limitations vis-a-vis operations. They have their own target market and the different banking sectors serve a different customer base. Some banks serve customers in rural areas who are engaged in agricultural activities, small businesses, self-help groups or small cottage industries while the commercial banks serve in both rural as well as urban areas. Most of the banks only cater to cities and major towns. An efficient banking system is now regarded as a necessity for growth of the economy.
The RBI is the apex bank and the monetary authority of India which regulates the banking system of the country. It governs all the banks in the country like commercial banks, cooperative banks and development banks (development finance institutions). The commercial bank includes public sector banks, private sector banks, foreign banks, regional rural banks and local area banks.
The commercial banks can be classified into two categories – public sector banks and private sector banks. Both categories of banks are meant to provide good banking facilities and services to customers.
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The private sector banks in India are the banks where the majority of the shares or equity is not held by the government, but by private share holders. These banks are a part of the Indian banking system which comprises of both private banks and public sector banks. The banking sector in India is dominated by the public sector banks. However after liberalisation in the government banking policy in the 1990s, the private sector banks have emerged and have grown rapidly over the two decades since liberalisation, using the latest technology, providing contemporary innovations and monetary tools and techniques.
The private sector banks are split into two groups by financial regulators in India, old and new. The old private sector banks existed prior to Nationalisation in 1969 and maintained their independence as they were too small to be nationalized. The new private sector banks are those that have gained their banking license after liberalisation of the 1990s.
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Given below are the points that explain the differences between public sector and private sector banks:
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Presently there are about 22 private sector banks in India. Listed below are the names of the private sector banks that are currently operating in the country:
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Small private banks are financial institutions that have the license to provide basic banking services by accepting deposits and lending. The aim of these banks is to provide financial inclusion to those sections of the economy which is not served by other banks like small business units, small and marginal farmers, micro and small industries and the unorganised sector. Given below are the names of small private banks in India:
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