Role of Private Banks in the Expension of Banking System in India


In today’s times, almost every family has at least one bank account, be it a public or a private bank. The banks have undeniably played a key role in structuring the Indian economy. Before nationalisation of banks, they were generally regarded as the class banking. But after the nationalisation of banks, they become accessible to major population and there was a shift to mass banking. However, in the early 1990s, the banks’ liberalization took place with an intension of giving license to a few private sector banks which are now some of the top private banks in India. The growth rate of private sector banks has been tremendous and relatively high as there are 22 private and 18 public sector banks as of now. The private sector banks have never failed in setting new benchmarks in various aspects in the past decades. So, some amazing aspects of private banks impacting people’s lifestyle and the Indian economy are worth acknowledging.


The private banks have brought a great change in lifestyle of especially the middle-class group of the society. When it comes to innovation, the private banks have always been front foot by introducing best ATM services, computerized accessibilities, mobile apps and many more. These banks have made the paperwork hassle-free as they generally use the direct selling agents. If a person needs a quick loan as most of the middle-class or new businessmen needs, they generally opt for the private banks, as their efficiency is high and turnaround time is relatively less.

Impact on public sector banks:

Now, this is one of the main role played by private banks for positive growth in the country’s wealth management system. Private Banks create a healthy competition which ultimately leads to a higher quality of wealth management. This competitiveness of the banks’ in a way benefits the customers as the average return rates offered by banks increases. For a long time, it was the belief that the private banks have higher interest rates for the loans as compared to public banks, but the things have changed now as the private banks are now putting more effort to increase their customers by compromising with their interest rates.

Scope of Foreign Investments:

The private sector banks undoubtedly have higher professional management skills as they walk hand in hand with the emerging technology. They also have many branches in the foreign countries which help the Indian companies understand the foreign market trends. For most of the developing countries, foreign trade plays a crucial role in the growth of the economy and understanding the foreign market becomes highly essential. In a situation like this, the largest banks in India which have many foreign branches help the government institutes with the financial requirements when making investments in the foreign markets.

Customer satisfaction:

As the competition among the banks is increasing, meeting customer needs have become a key factor in determining the growth of a bank. And, many studies have proven that customer satisfaction and expectation is higher with private banks as compared to public banks. Thus, it won’t be wrong to say that the private banks have brought about a significant change in the country.

Hope this article was helpful.