To many of us, both ‘public sector bank’ and ‘nationalized bank’ might not seem so different but there are a few notable differences between them. A bank is a financial institution that handles cash deposited by the public, handles them, safeguards them, and also offers loans to the public. Public Sector banks and nationalized banks come under the category of commercial banks in India.
You would have visited a bank or would have done some bank-related work once or maybe many times. Nowadays we need not visit a bank since there are alternatives like net banking and all. Banks are of three types namely private sector banks, public sector banks, and nationalized banks. The terms public sector bank and the nationalized bank can be used interchangeably and can sometimes refer to the same thing.
Public Sector Bank vs Nationalised Bank
The main difference between a public sector bank and nationalized bank is that a public sector bank is under the state or central government from the very beginning while the nationalized bank is the one that started as a private sector bank but was taken under by the government for the better good.
Public sector banks are under the government as the government is a major stakeholder of these banks. There are 12 public sector banks in India. Public sector banks also include nationalized banks because every nationalized bank is, or will become a public sector bank.
A nationalized bank is the one that started as a private sector bank but was later taken by the government for betterment. Earlier there were 20 nationalized banks but now there are 19 as two of them merged.
Comparison Table Between Public Sector Bank and Nationalized Bank
| Parameters of Comparison | Public Sector Bank | Nationalized Bank |
| Definition | A public sector bank is a bank in which the majority stakeholder is the government. Nationalized banks are also public sector banks. | A nationalized bank is the one that starts as a private sector bank or under the ownership of someone but is later taken under the government through some kind of ordinance for the good of the nation. |
| Number of banks | There are 12 Public Sector Banks in India. | There were 20 nationalized banks earlier but now there are 19 nationalized banks since two of them merged later. |
| Broadness | Public sector banks include all the nationalized banks in them as it is a broader term. | It is a narrower term compared to public sector banks and a public sector bank need not be a nationalized bank. |
| Start as | These banks start as banks under the state government or the central government. | These banks start as private sector banks or under the ownership of someone. |
| Examples | Punjab National Bank, Bank of Baroda, Central Bank of India, State Bank Of India, etc. | UCO Bank, Union Bank of India, Dena Bank, etc. |
What is a Public Sector Bank?
A public sector bank is the one in which the majority shareholder (more than 50%) is the government and the government is responsible for all the activities that occur in it. The nationalized banks are also public sector banks.
There are currently 12 public sector banks in India. They are:
- Punjab National Bank
- Bank of Baroda
- Bank of India
- Central Bank of India
- Canara Bank
- Union Bank of India
- Indian Overseas Bank
- Punjab and Sind Bank
- Indian Bank
- UCO Bank
- Bank of Maharashtra
- State Bank Of India
What is a Nationalized Bank?
Nationalization is the process by which any private company or body or organization is taken under by the government for the welfare of the nation. Nationalized banks are those which start as private sector banks but are taken by the government later.
A nationalized bank is owned by the Government of India. Private sector banks are nationalized to increase the overall economy of the country. Earlier, before Independence, banks used to be private but later on, i.e. after independence, the government started nationalizing the banks, and thus nationalized banks were established for the betterment of the public.
Currently, there are 19 nationalized banks in India. Their names alongside their years of nationalization are as follows:
- Andhra Bank- 1980
- Allahabad Bank- 1969
- Bank of Baroda- 1969
- Bank of India- 1969
- Bank of Maharashtra- 1969
- Canara Bank- 1969
- Central Bank of India- 1969
- Corporation Bank- 1980
- Dena Bank- 1969
- Indian Bank- 1969
- Indian Overseas Bank- 1969
- Oriental Bank of Commerce- 1980
- Punjab & Sind Bank- 1969
- Punjab National Bank- 1969
- Syndicate Bank- 1969
- UCO Bank- 1969
- Union Bank of India- 1969
- United Bank of India- 1969
- Vijaya Bank- 1969
Main Differences Between Public Sector Bank and Nationalized Bank
- Every nationalized bank is also said to be a public sector bank while all public sector banks are not said to be nationalized banks.
- There are 19 nationalized banks while there are only 12 public sector banks in India.
- A nationalized bank starts as a private sector bank but was taken by the government while a public sector bank starts as a bank under the government itself.
- Public sector bank is a broader term compared to a nationalized bank. Nationalized banks come under public sector banks.
- All nationalized banks are public sector banks or they will become public sector banks while a public sector bank can never become a nationalized bank.
Conclusion
Broadly we can classify banks into three categories namely private sector banks, public sector banks, and nationalized banks. There are no such significant differences between a public sector bank and a nationalized bank because all nationalized banks are ultimately private sector banks but a private sector bank need not be a nationalized bank.
Public sector banks are always under the government and the majority stakeholder in it is the government itself while a nationalized bank starts as a private sector bank but is taken under the government later on through an ordinance. There are 12 public sector banks only while there are 19 nationalized banks.
References
- https://www.tandfonline.com/doi/abs/10.1080/09585192.2011.543639
- https://books.google.com/books?hl=en&lr=&id=y2DTEc_Cod4C&oi=fnd&pg=PA275&dq=public+sector+bank&ots=NRXSzRVuQe&sig=dlOvSUU_qQbUn7HWoh8BVIHh2xU