Private Sector Banks of India: Definition and types

Private Sector banks are those Banks which are owned by private individuals or business corporation. In other words a private sector banks are those Banks which government share less than 51 percent.

Private Sector banks may be classified into two categories :

A) Indian Bank : These are the banks which are incorporated in India under the Indian companies act. These banks are owned and controlled by the Indian entrepreneurs. In the pre-reform period, there was only 24 banks in the private sector. The Narasimham committee in its first report recommended the freedom of entry of private banks in the financial system. It recommended that the central bank should permit the establishment of new banks in the private sector. The central bank considered the recommendations and allowed banks to be set up in the private sector. At present there are 27 Indian private sector banks operating in the banking sector.

Some of the leading Indian Private Sector Banks Are :

  1. ICICI bank limited: ICICI BANK is a type of private bank which was founded in the year 1994 (25 years ago) . Headquarters of this bank at Mumbai, Maharashtra. No of branches of this bank all over the country almost 4850. Key people of this bank is Chanda Kochar (MD&CEO).Total assets of this bank are Rs 771,791.16 Crore. Share price of the bank Rs 358.30 .
  2. HDFC bank limited : This is a type of private bank which was founded in the year 1994 (23 years ago). Headquarters of this bank is Mumbai, Maharashtra. No of branches of this bank all over the country almost 4712. Key people Adithya Puri (MD). Total assets of this bank are Rs 863840. Share price of the bank Rs 1970.
  3. AXIS Bank Limited : Axis Bank is a type of private bank which was founded in the year 1993 as UTI . Headquarter of this bank at Mumbai Maharashtra. No of Branches all over the country almost 3299 . Key people of this bank is Shikha Sharma (MD& CEO). Total assets of this bank are Rs 601467.66 Crores. Share price of Rs 613.
  4. Yes Bank Limited : This is a type of private bank which was founded in the year 2004 (15 years ago). Headquarter of this bank is Mumbai, Maharashtra. Key people of this bank is Rana Kapoor (MD &CEO). Total assets of this bank are Rs 215059 . Share price of Rs 362.
  5. Federal Bank Limited : This is a kind of private bank which was founded in the year 1949 (70 years ago). Headquarters of this bank at Kochi,Kerala . Key people of this bank is Shyam Srinivasan , MD & CEO. Total assets of this bank are Rs 114976 Crore. Share price of Rs 101.
  6. Standard Chartered Bank : This is a type of private bank which was founded in the year 1858 (160 years ago). The headquarter of this bank at Mumbai, Maharashtra. No of branches all over the country almost 100 . Key people Zarin ,Daruwala. Total assets of this bank are Rs 1449888 Crore. The share price of Rs 67 .
  7. Industrial Bank Limited : This bank is a type of private bank which was founded in the year 1994 (25 years ago). Headquarter of this bank is Mumbai, Maharashtra. No of branches all over the country almost 1211 . Key people Ramesh Sobti ,CEO. Total assets of this bank are Rs 178648 crores. Share price of Rs 1730.
  8. J&K Bank : This is a type of private bank which was founded in the year 1938 (80 years ago). Headquarter of this bank is Srinagar, Jammu& Kashmir. No of branches of this bank almost 866. Key People of this bank is Parvej Ahmed (Chair man & CEO). Total assets of this bank are Rs 82018 Crore. Share price of this bank is Rs 75 .
  9. IDFC bank limited : This is a type of private bank which was founded in the year 2015 ( 4 Years ago). Headquarter of this bank is Mumbai, Maharashtra. No of branches all over the country almost 77 . Total assets of this bank Rs 112159. Share price of Rs 58
  10. Federal Bank Limited : This is a type of private bank which was founded in the year 1949( 70 years ago). Headquarters of this bank is Kochi Kerala. No of branches 1741 approximately. Total assets of this bank Rs 114976. Share price of Rs 101.
  11. Kotak Mahindra Bank Limited : Kotak Mahindra Bank is a type of private bank which was founded in the year 1985 as a Kotak Mahindra finance Ltd. Headquarters of this bank is Mumbai, Maharashtra. No of branches almost 1369 . Key people Uday Kotak (Founder And Executive vice Chairman. Total assets of Rs 214589 Crore. Share price of Rs 1091.
  12. RBL bank limited : This is a type of private bank which was founded in the year 2002. Headquarters of this bank is Mumbai, Maharashtra.
Private sector banks

B) Foreign Banks : These banks are foreign in origin. These banks are incorporated outside India under the law of the home country but have a place of business In India.

Foreign Banks have their presence from the British period in India. Initially they were allowed to operate only through branches but now they are allowed to set up subsidiaries in India.

With the changes in the banking policy in post-Reform period, the number of foreign banks have shown an increase. There are 29 foreign banks from 21 countries operating in India with 272 branches as on June 2007 . The branches or offices of foreign banks are mainly located in urban areas of big cities.

The foreign banks performs mostly the same range of functions as being performed by Indian Banks. However, they are most active players in the export and import trade and foreign exchange transactions. Foreign Banks have created an entirely new playing field in the banking sector through their vast range of products, superior technology and a very high level of customer service.

Some of the leading Foreign banks operating in India are –

  1. Standard Chartered Bank
  2. Hongkong Shanghai Banking Corporation (HSBC)
  3. American Express Banking Corporation
  4. Bank of Tokyo
  5. Deutsche bank
  6. Citizen bank etc.

Functions of Foreign Banks:

  1. Bringing together foreign institutional investors and Indian companies.
  2. Helping foreign companies and Indian companies to enter into joint ventures.
  3. Raising finance for power generation, telecommunications and mining projects in India.
  4. Managing data and information systems by using latest technology.

Importance Of Private Sector Banks :

The private sector banks are playing a viral role in the Indian economy. The following points highlights their importance:

  1. These banks have bought in state of the art technology in the banking sector.
  2. These banks provides a healthy competition in the banking system and contributed to the efficiency of public sector banks.
  3. These banks have helped in introducing a high degree of professional management and marketing concepts into banking.
  4. These banks especially the foreign banks have promoted foreign investments in India and helped in organizing joint ventures.
  5. These banks have helped the Indian entrepreneurs and companies in tapping the international financial markets to raise funds.

Reserve Bank Of Indias Guidelines on Private Banks :

The Central Bank of India recognised the need to introduce greater between public sector banks and private sector banks to achieve higher productivity and efficiency in the banking system and hence allowed the entry of private banks. It issued the following guidelines relating to private Banks :

  1. The private banks should be registered as a public limited company under the companies act 1956.
  2. The various provisions of the Reserve Bank of India Act, 1934 and the banking regulation act 1949 shall also apply to private banks.
  3. It prescribed a minimum initial paid up capital of Rs 200 crore. Moreover, the initial minimum paid up capital shall be increased to Rs 300 crore in subsequent three years after commencement of business.
  4. The private banks having head office at a place which do not have Head office any other bank will be given preference while granting licenses .
  5. The private banks has to comply with the prudential norms in relation to income recognition, classification of assets, capital adequacy norms and other matters relating to banking operations .
  6. A non banking financial company (NBFC) can convert itself into a commercial bank if it satisfies the following criteria of –

a) A minimum net worth of Rs 200 crore.

b) A credit rating of not less than AAA (or it’s equivalent) in the previous year.

c) Capital adequacy of not less than 12 percent

d) Net NPAs not more than 5 percent.

Frequently Questions And Answers :

1. How many private sector banks in india ?

Ans: There are 27 private sector banks in India.

2. Which is the largest private sector banks in India?

Ans: ICICI bank is the largest private sector bank.

3. Which is the first private sector banks in india ?

Ans: Standard Chartered Bank is the first private sector bank in India.

Related :

  1. WHAT IS BANK AND WHAT ARE THE TYPES OF
  2. WHAT IS A COMMERCIAL BANK?

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