Indian Private Banks

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A private bank is a bank whose major stake is owned by private stakeholders and not by government. Government has a very little role to play when it comes to private sector banking. Private banks play a pivotal role for a country's economic development. They are the major players in today's market. Private banking has invited foreign economies to invest in a developing country like India. They have smoothen the process of business expansion, especially for multinationals. Private banks are progressing at a faster rate in India than Government-owned banks.

Private banks have been functioning in India ever since the origin of banking system in India. But private banks were not given importance in the earlier years. The dominance of public sector banks did not allow the private sector banks to participate in the overall development of our country. Therefore, private banks were less active and non-participative before liberalization.

The year 1969 was a landmark in the history of commercial banking in India. In July 1969, the government nationalized 14 major commercial banks of the country. In 1980, government nationalized 6 more commercial banks. But the importance of the private sector banks remained the same even after nationalization. The RBI decided to liberalize the banking policies. The liberalization policy gave license to private banks to operate in a more flexible environment. The private banks before nationalization are called old private banks and the ones after nationalization are called new private banks.

The post-nationalization period noticed a remarkable change in the economy's banking sector. A leading bank of the country had the following objectives post-nationalization:

  • To break the ownership and control of banks by a few business families.
  • To prevent concentration of wealth and economic power.
  • To mobilize savings of the masses from every nook and corner of the country.
  • To pay greater attention to the credit needs of the priority sectors like agriculture and small scale industries.

Private Banks in IndiaThe country also witnessed a remarkable expansion in the banking and financial system. One of the biggest achievement was reallocation of sectoral credit in favor of agriculture, small scale industries and exports which formed the core of the priority sector. Certain other sectors of the economy which also received attention for credit allocation were professionals and self-employed persons, artisans and weaker sections of the society. Conversely, there was a sharp fall in the bank credit to large scale industries.

Nationalization of banks was a mixed blessing. After nationalization there was a shift of emphasis from industry to agriculture. The country witnessed rapid expansion in bank branches, even in rural areas. Branch expansion program led to mobilization of savings from all parts of the country.

The banks that started operating post the Banking Sector Reforms in 1991 are called the new private banks. They introduced economic and financial reforms in the country. The Banking Regulation Amendment Act of 1993 permitted the entry of new private banks in the Indian Banking System. However, these banks had to accomplish certain criteria if they wanted to operate in the economy. The private banks like Bank of Bombay, Bank of Bengal, Bank of Madras were merged together to form a single bank called Imperial Bank of India.

The private banking in India has grown and developed over years. The cut-throat competition in the banking sector has compelled private banks to come up with new services. They have to depend heavily on technology and service. Private banks not only compete nationally but they have enough competition across borders. So technological advancement and incomparable services is what is going to help a bank stand out from other banks.

The primary function of any bank is to accept deposits and lend loans. This function is common in all banks. Secondary functions of a bank makes it different from the other banks. The secondary function can include agency functions and utility functions. A bank must provide its customers a service which no other bank provides. This will strengthen banker-customer relationship. In addition the bank will gain customer loyalty. Here is list some of the private banks in India:

  • Bank of Punjab
  • HDFC Bank
  • ICICI Bank
  • Axis Bank
  • Indusland Bank
  • Kotak Mahindra Bank
  • Yes Bank
  • Global Trust Bank
  • Centurion Bank Ltd
  • Times Bank
  • IDBI Bank Ltd

Private banks in India has a got a great response in terms of service and quality banking. Globalization has encouraged multinationals and foreign banks to set up their business unit in a developing country like India. In the private banking is all about delivering sophisticated service to customers. It is about providing appropriate solutions to customer's financial problems and providing financial advice to customers. Private banking works for optimum utilization of financial resources of the country.