Notes on the Place of Private Sector Banks in India

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In India the private sector banks consist of the following three categories:

(i) Private Scheduled Banks

(ii) Private Non-scheduled Banks

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(iii) Foreign Banks

This apart in the early stages of banking activity in India, native bankers called inĀ­digenous bankers and moneylenders were operating in the unorganised sector. They are not permitted to undertake banking business presently. They also do not come under the provisions of Banking Regulation Act.

Of these types, Private Scheduled Banks is functioning on par with the other public sector banks in various respects. Since, they have been included in the second schedule of Reserve Bank of India Act; they are enjoying the privileges as that of any other scheduled banks. These privileges, importantly, include refinance facility from RBI and participation in money market activities.

The joint stock banks in the private sector in India numbered 35 at present out of which 34 are scheduled banks and one non-scheduled bank. Of the 34 private sector banks, 9 are newly set up under liberalised policy. These banks together accounted for 10.3 per cent of total assets of all commercial banks in India as on 31st March 1998. They have made net profit of Rs. 841.88 crore during 1997-98 as compared to Rs. 685.77 crore in 1996-97.

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The foreign banks in private sector are the branches of banks incorporated in foreign countries. There are 42 foreign banks in India. Their branches are mainly located in the big cities. The foreign banks perform mostly the same range of services as being performed by local banks.

However, they are more active players in export/import trade and transactions relating to foreign exchange operations. The role of foreign banks is also important for the development of the economy of the country, particularly for the development of foreign trade.

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