Understanding Public vs. Private Banking: Insights from IDFC First Bank and Canara Bank
New Delhi [India], August 29: India’s banking sector is truly dynamic, with a unique mixture of public and private banks catering to the banking needs of the world’s largest population. The latest data shows that there are 12 public sector banks and 21 private sector banks in the country.
Banks from these sectors have unique characteristics, qualities, weaknesses, and strengths. Understanding what differentiates these banks to make informed investment choices is important.
This comprehensive post will explore what differentiates these banks with insights from the IDFC First Bank and Canara Bank. So, let’s dive into the details of the matter for a better idea!
What are Public Sector Banks Like Canara Bank?
Banks with majority ownership or stakes the central or state government holds are public sector banks. Canara Bank is an excellent example of a public sector bank, as the Government of India owns 62.93% of total Canara Bank shares. These banks rely on the financial guidelines from the government to operate, making them a reliable choice for many.
The primary intent behind setting up a public sector bank is for the government to use these institutions to uplift the population. This is why governments launch new schemes through these banks or offer loans at low interest rates. So, let’s check out some of the defining characteristics of public sector banks like the Canara Bank:
• Government Ownership: Of course, the first defining characteristic of a public sector bank is that the majority of its share belongs either to the state or central government.
• More Accessibility: Another characteristic of public sector banks like Canara Bank is they focus on making financial services more accessible to the people of the country.
• Expansive Branch Network: Most public sector banks have an excellent network of branches spread across urban, rural, and semi-urban areas.
What are Private Sector Banks Like the IDFC First Bank?
Private sector banks are the ones whose majority shares are held by a private company, companies, or even an individual in certain cases. The IDFC First Bank is one of those banks where multiple parties hold different percentages of shares. The IDFC Limited owns the majority of shares, amounting to 35.39%, while the Government of India owns only 3.502% of shares in this bank.
However, private ownership does not give these banks any free pass as they still need to comply with the rules and regulations of RBI. These banks are more efficient and offer a wide range of services at an additional cost. This is one of the reasons why government policies and laws still affect IDFC Bank share prices.
That said, let’s take a look at some of the defining characteristics of private sector banks like the IDFC First Bank:
• Efficient Services: Every Indian knows the pain of getting something done from a public sector bank. However, things are very different with private banks like the IDFC First Bank, where everyone prioritizes efficiency.
• Customer-Centric Approach: Private sector banks prioritize customer satisfaction at all costs and even offer personalized services to provide better experiences.
• Higher Interest Rates and Charges: Private banks offer better and more efficient services, but they also charge you for increased interest rates and banking charges.
Comparing IDFC First Bank (Private) With Canara Bank (Public)
Now that you have better clarity on the meaning and characteristics of public and private sector banks, it is time to get into comparison. So, let’s check out this tabular breakdown and reasons of differences between the IDFC First Bank share prices and Canara Bank:
Parameters
IDFC First Bank
Canara Bank
Ownership
Majority private ownership
Majority Government ownership
Regulatory Body
Rules and regulations issued by the Reserve Bank of India
Rules and regulations issued by the Reserve Bank of India
Customer Experience
Great customer experiences
Moderate customer experience
Branch Network
Relatively limited
Extensive
Range of Services
Wide range of banking services
More focus on core banking services
Customer Service
Easily accessible
Not always accessible easily
Interest Rates
Relatively higher
Competitive interest rates
Reliability
Less reliable
More reliable
How to Choose the Right Bank?
Choosing between a public and private sector bank becomes much easier when you know what to look for. This means you must clearly understand your specific banking needs and requirements.
Most experts suggest that you can go for a private-sector bank like the IDFC First Bank if:
• You require efficient banking services to meet your needs.
• You are to pay little extra charges in exchange for better quality services.
• You prefer the new digitized approach to banking rather than the conventional ways.
• On the other hand, they recommend people to choose public sector banks like the Canara Bank if:
• You prioritize security and prefer the traditional approach to banking.
• You need or value an extensive branch network and a sense of security from the government.
• You need to access specific government schemes and subsidies.
Understanding and acknowledging that different people and organizations have different banking needs is always important. Both public and private sector banks have their strengths and shortcomings.
Therefore, ensuring that you start things on the right foot with a clear idea of your needs is of the utmost importance. This will help you make an informed choice and choose the right banking service provider.
Final Thoughts
The Indian banking sector is undergoing a massive revolution, with technology becoming synonymous with banking. Many dedicated public sector banks like the Canara Bank are still working towards making banking more accessible to people. Then, private players like IDFC First Bank mostly focus on quality and efficient services.
If you are interested in capitalizing on this growth, keep track of Canara Bank’s share price and invest at the right time. The same goes for the share prices of IDFC First Bank. Since both these stocks are not going anywhere, investing in them could be great.
