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Public VS Private Banks: What Are The Main Differences?

Keeping your money somewhere secure and reliable is important. It’s a concern you likely share with most people across the country.

If you’re looking into financial institutions for this reason, you might find yourself getting curious about the distinction between public vs private banks.

What is the difference between a public bank and a private one? The banking industry can be somewhat confusing. Understanding this distinction can help you to make the proper choices as it pertains to your financial situation.

Ready to learn more? Read on and we’ll walk you through everything that you should know.

Public vs Private Banks

What is the main distinction between these two forms of banking? The answer is actually quite simple. The distinction comes down to who owns a majority stake in the bank.

In the case of most public banks, the government owns a majority stake in the institution. The private banks, on the other hand, are owned mostly by stockholders of that particular institution.

That’s the main difference. Both kinds of banks tend to offer the same services to their customers. They both function in very similar ways.

It’s who’s running things behind the scenes that differ. It is possible that charges involved for certain services might vary from a private bank to a public one.

Some might argue that the quality of service might vary. Overall, however, there’s very little to differentiate the two kinds of banking from one another.

Public Sector Banks

As we said above, public banks are financial institutions where over 50% of the shareholdings are held by the state government. They are often considered to be the financial backbone of a country and a major part of a country’s overall security and stability.

The large customer base does generally lead to slightly higher interest rates than most private banks. However, public banks also provide a great deal of confidence to their customers.

The government backing means there’s little to no chance that a bank will have to default on their customer’s finances should an emergency occur.

If a bank were to run into trouble, the government would likely cover them and give the money to those it was owed.

Private Sector Banks

Private banks, on the other hand, aren’t able to offer this same security. More than 50% of the shares of these banks are held by individuals or private institutions.

This means that there is a higher chance that the bank may have to default on customer finances should an emergency occur.

Why would someone go to a private bank if this was the case? It’s because private banks go out of their way to create an idealized banking reality.

They compete with public banks by aggressively pursuing customers and offering them a top-tier experience with high customer satisfaction.

They do this by offering slightly lower interest rates, increased convenience, and a number of customer-focused programs aimed to aid individuals in a better financial situation.

There is no consensus on what the best private bank out there is, but there are many worth looking into if you’re interested in private banking.

Final Thoughts On Public vs Private Sector Banks

If you’re looking for somewhere to keep your money safe, you’ll need to take the time to understand public vs private banks. The above can help you understand the major differences.

Need more financial information? Keep scrolling our blog for more.

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