Comparison of performance for Public vs Private Banks: Study of key drivers and Indicators for measuring performance

Abstract

A bank is not only a community's financial heart, but it also has a responsibility to assist in every way possible in improving the economic conditions of the general public. A bank is a type of financial institution that accepts deposits and invests them in lending. Banks are an important part of the financial system and active participants in financial markets. A bank's primary function igggp link those with capital (such as investors or depositors) with others who are looking for it (such as individuals wanting a loan or businesses wanting to grow). Banks play a critical part in every country's economic development. They control a huge portion of the money supply in circulation. They can impact the type and character of output in any country by influencing the volume of bank money. Economic development is a continual and dynamic process. Because the level of resource mobilization and investment, as well as the operational efficiency of the many divisions of the economy (such as trade, industrial development, and agriculture), banks are the mainstay of a country’s economic advancement. As a result, banks have become an integral part of all economic activity in India in the modern economy. With a population of over 1.3 billion people, India is a massive country. As a result, the reported number of over 100,000 financial outlets across the country may not come as a surprise. This number is theoretically correct, but it needs to be distinguished. This figure is based on the fact that there are about 96,000 rural cooperative financial services outlets and 1485 urban cooperative financial service outlets operating at the local level to serve an important part of farmers, the unorganized sector, SMEs, and other businesses. In addition, the Reserve Bank of India regulates about 140 larger banks, including Regional Rural Banks (RRB), Foreign Banks, Private Banks, and Public Sector Banks. Public Sector Banks (PSBs) In India, the term "public sector banks" is often used for Government banks. These are the banks where the controlling stake in the capital is owned by the Government of India, whereas the rest of it is listed for institutional and public trading. The management is key in terms of defining this institution because the board of directors for PSBs are appointed by the Government of India as per the regulations of regulatory authority. For the purpose of this study, we have chosen 5 large PSBs (before the mega-merger) and analyzed the same across multiple parameters. Private Banks (PVBs) Private sector banks are primarily the companies registered under the companies act, who obtain a licence to provide banking products & services and provide financial services to the public through their registered outlets. The management of these banks is corporatized and is chosen through the shareholding pattern and as per the regulations by RBI and SEBI. Private sector banks in India play a key role in India's financial service industry as there are a few large players like ICICI banks, which are much bigger in size as compared to several PSBs, hence for the purpose of this study we have taken 5 largest PVBs in India. We are comparing the functioning of the private sector banks vs the public banks in India, given that the core structure & objectives of Private banks are designed to be commercially profitable, whereas public banks are designed with a structure of mixed position to run a commercially viable business while serving a certain segment of society in a structured manner. We have conducted this study by collecting data by taking the top five public as well as private banks for the Analysis and then collected bank-wise data to add them up and get an aggregate picture of public vs private banks. The next part of this study includes a fundamental analysis of two key aspects of a bank in its functional framework, i.e., Deposits and Advances. In addition, there are several other important factors such as Asset Quality and Profitability.