Confused about Public Sector and Private Sector Bank: Which Bank to Choose?

Every person has to open a bank account at some point. And every person chooses a bank according to their needs, some need a bank account for business, some to receive money from government schemes, some to take loans and some to keep their money safe. When it comes to choosing a bank, some find private banks safer while some find government banks more reliable.

I also had this question and immediately Googled whether my bank is private or public. And asked Grok AI and also got information about all the private banks in India. Today I will tell you about all this in detail, so that you can understand the types of these banks and you can choose the right bank for you. So, let’s find out!

Difference Between Public Sector and Private Sector Bank: Key Difference

There are many differences between public sector banks and private sector banks, and understanding these differences will make it easier for you to choose a bank. I read that public sector banks are owned by the government, and private sector banks are owned by private individuals or companies. Both types of banks are regulated by the Reserve Bank of India (RBI), but there are many differences in their operations and services. Let’s look at these differences in detail:

Ownership:

In public sector banks, the government has more than 50% stake, such as SBI Bank, Canara Bank, Bank of Baroda, Punjab National Bank, Union Bank, Bank of India, and Indian Overseas Bank. I learned from the posts above that many people have the question of whether Canara Bank is private or government bank, but Canara Bank is a public sector bank. On the other hand, private sector banks have a higher stake of private entities, such as HDFC is private or government bank – HDFC is a private bank, as well as ICICI Bank, Axis Bank, Bandhan Bank, and IDBI Bank (although IDBI has some stake in the government, it is now considered a private bank).

Which Private Bank is Best for You? Top 10 Private Banks

Customer Service and Innovation:

Private sector banks focus more on customer service and digital banking. For example, ICICI Bank is a private or government bank – ICICI is a private bank, and it is famous for its iMobile Pay app, which is very convenient. My friend told me that Axis Bank’s digital services are also very good. But public sector banks are a bit behind, like SBI Bank has digital banking, but their apps are sometimes slow.

Fixed Deposit Rates:

Private banks usually offer higher fixed deposit rates. I read that DCB Bank offers 8.05% interest rate for 19-20 months, while RBL Bank offers 8.00% for 500 days, which is higher than public sector banks. But public sector banks like SBI Bank, Bank of Baroda, and Canara Bank have slightly lower interest rates, but they feel more secure.

Stability and Trust:

Public sector banks are considered more stable, because they have the support of the government behind them. For example, Bank of Baroda is private or government bank – Bank of Baroda is a public sector bank, and it is very reliable. My father told me that he has kept his fixed deposit in SBI, because he feels that government banks are more secure. But private banks have some risks, especially the problem of loan defaults at the moment.

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Loan Defaults and Financial Stability:

The problem of loan defaults has increased in private banks at the moment. I read that in September 2024, bad loans have increased in private banks like HDFC, Kotak Mahindra, and IndusInd, because the asset quality has deteriorated due to over-leveraged retail borrowers. Moreover, in March 2025, a discrepancy of ₹1,580 crore was found in the derivative portfolio of IndusInd Bank, due to which the RBI has started a review of the derivative books of private and public sector banks. But in public sector banks, the impact of such problems is less, because they are backed by the government.

List of Public Sector and Private Sector Banks in India as of 2025

List of Public Sector Bank and Private Sector Bank along with their headquarters and market capitalization.

Public Sector Banks (12 Banks, as of 2025)

1. State Bank of India (SBI) – Mumbai, Maharashtra
2. Punjab National Bank (PNB) – New Delhi
3. Bank of Baroda – Vadodara, Gujarat
4. Canara Bank – Bengaluru, Karnataka
5. Union Bank of India – Mumbai, Maharashtra
6. Indian Bank – Chennai, Tamil Nadu
7. Bank of India – Mumbai, Maharashtra
8. Indian Overseas Bank – Chennai, Tamil Nadu
9. Central Bank of India – Mumbai, Maharashtra
10. UCO Bank – Kolkata, West Bengal
11. Bank of Maharashtra – Pune, Maharashtra
12. Punjab and Sind Bank – New Delhi

Also Read: Maharashtra Gramin Bank: Net Banking, Customer Care and much more!

Private Sector Banks (21 Banks, as of 2025)

The table below lists private sector banks ranked by their market capitalization (₹ Crores) as of February 2025:

Sources & Notes:

• The market capitalization values are as of February 2025, based on data from Forbes India.
• The number of banks and their rankings may change over time. Always check RBI (Reserve Bank of India) and SEBI (Securities and Exchange Board of India) for the latest updates.

Which bank to choose?

After understanding the difference between Public Sector and Private Sector Bank, which bank to choose depends on your needs. I think, if you want stability and trust, then choose a public sector bank like SBI Bank, Canara Bank, or Bank of Baroda. But if you want digital banking and higher fixed deposit rates, then choose a private sector bank like HDFC Bank, ICICI Bank, or Axis Bank.

I liked SBI Bank for my savings account, because it is more secure, and they have a branch in my village. But for my fixed deposit, I am considering HDFC Bank, because their interest rates are good. But now I have read about loan defaults and derivative review of IndusInd Bank, so I am going to take a little cautious decision.

Some important tips

• Understand your needs: If you want digital banking, choose ICICI or HDFC. If you want stability, choose SBI or Canara Bank.
• Know about Loan Defaults: Currently, bad loans have increased in some private banks, so check the asset quality of your bank.
• Remember RBI Regulations: RBI has started derivative review, so check the financial stability of the bank.
• Look at Customer Service: Private banks are more customer-centric, but their complaints are also more, so read reviews.

FAQ for Public Sector and Private Sector Banks:

1. Canara Bank is private or government bank?
   • Canara Bank is a public sector bank. I came to know from the posts above that Canara Bank is owned by the government, and it is very reliable.
2. Axis Bank is private or government bank?
   • Axis Bank is a private sector bank, and it is famous for wealth management and corporate banking.
3. Bank of Baroda is private or government bank?
   • Bank of Baroda is a public sector bank, and it is one of the largest banks in India.
4. HDFC is private or government bank?
   • HDFC Bank is a private sector bank, and it is the largest private bank in India.
5. IDBI is private or government bank?
   • IDBI Bank is now considered a private sector bank, although the government has some stake, but it was privatized in 2019.
6. Union Bank is private or government bank?
   • Union Bank is a public sector bank, and it focuses on financial inclusion.
7. Bank of India is private or government bank?
   • Bank of India is a public sector bank, and it was established in 1906.
8. ICICI Bank is private or government bank?
   • ICICI Bank is a private sector bank, and it is famous for digital banking.
9. Indian Overseas Bank is private or government bank?
   • Indian Overseas Bank is a public sector bank, and it was established in 1937.
10. Punjab National Bank is private or government bank?
    • Punjab National Bank is a public sector bank, and it is the second largest PSB in India.
11. SBI Bank is private or government bank?
    • SBI Bank (State Bank of India) is a public sector bank, and it is the largest bank in India.
12. Bandhan Bank is private or government bank?
    • Bandhan Bank is a private sector bank, and it is famous for microfinance and financial inclusion.