Private bank: definition, list, history, types, advantages and disadvantages

A private banks is a financial institution owned by an individual or a company, and not by the government. These banks are authorised to operate under financial norms and stability set by the central banking authority, Reserve Bank of India (RBI).

The list of popular private banks include HDFC bank, ICICI bank, Axis bank, Kotak Mahindra bank, IDBI bank, Yes bank, Federal bank, Indusind bank, RBL bank, J&K bank and Bandhan bank.

The history of private banks leads back to the establishment of the Bank of Sweden in 1668 by private individuals to finance trade and other commercial operations. IndusInd Bank is the first private bank in India, established in 1994 by SP Hinduja.

The types of private sector banks include commercial banks, small finance banks, cooperative banks, and payments banks. Commercial banks are the most widespread and provide customers with multiple facilities, including savings accounts, loans, and credit cards.

The private banks have several advantages including personalized solutions, confidential services, personalized financial planning, efficiency and innovation, faster decision making, concierge services, and exclusive investments options. Since, they provide exclusive banking services to their customers, they do have a few disadvantages as well.

The disadvantages of private sector banks include high service fees and interest rates, concentrated services in urban areas, and prioritization on profit-making over social obligations.

What is a private bank?

A private bank is a financial institution offering customised banking services to the customers with high-net-worth individuals (HNI) that includes wealth management services. The private banks also offer other services including include investing and portfolio management, tax services, insurance, and trust and estate planning, according to the Investopedia article titled “What Is Private Banking? Definition and How It Works“, written by James Chen on April 15, 2024.

The private banks are known for providing privacy and tailored proprietary solutions needed by most of the high-net-worth individuals (HNWIs).

Private banks also provide a dedicated “relationship manager” to every account holder with their bank who handles from providing financial advices, insurance to arranging for a mortgage. There are a total of 21 private sector banks in India from where customers gets such dedicated services.

What is the list of private banks in india?

There are 21 private banks in India that are listed below with market cap and headquarter, according to data from BSE India on November 4, 2024.

#	Bank Name	Market Cap in Cr. Rs.	Headquarter
1	HDFC Bank	13,07,953.56	Mumbai, Maharashtra
2	ICICI Bank	8,99,690.95	Mumbai, Maharashtra
3	Axis Bank	3,52,690.42	Mumbai, Maharashtra
4	Kotak Mahindra	3,43,646.54	Mumbai, Maharashtra
5	IDBI Bank	88,438.51	Mumbai, Maharashtra
6	IndusInd Bank	82,849.81	Pune, Maharashtra
7	Yes Bank	63,731.30	Mumbai, Maharashtra
8	Federal Bank	50,051.69	Aluva, Kerala
9	IDFC First Bank	48,177.63	Mumbai, Maharashtra
10	AU Small Finance Bank	46,485.95	Jaipur, Rajasthan
11	Bandhan Bank	29,029.70	Kolkata, West Bengal
12	Karur Vysya Bank	17,839.07	Karur, Tamil Nadu
13	City Union Bank	13,213.59	Kumbakonam, Tamil Nadu
14	Jammu & Kashmir Bank	10,918.22	Srinagar, Jammu Kashmir
15	RBL Bank	10,461.25	Mumbai, Maharashtra
16	Karnataka Bank	8,133.23	Mangaluru, Karnataka
17	Tamilnad Mercantile Bank	7,009.43	Thoothukudi, Tamil Nadu
18	South Indian Bank	6,336.62	Thrissur, Kerala
19	CSB Bank	5,355.51	Thrissur, Kerala
20	DCB Bank	3,767.57	Mumbai, Maharashtra
21	Dhanlaxmi Bank	868.34	Thrissur, Kerala

What are the top private banks in india?

The HDFC bank is the top private bank in India in terms of market capitalization, followed by ICICI and Axis bank. The top 10 private banks in India are listed below.

• HDFC bank
• ICICI bank
• Axis bank
• Kotak Mahindra bank
• IndusInd bank
• IDBI bank
• Yes bank
• IDFC First bank
• AU small finance bank
• Federal Bank

1. HDFC bank: HDFC Bank is the top private bank in India with a market cap of 13 lakh crore rupees. Globally, it is the sixth largest bank and is well-known for its innovative approach, latest technology integration and exceptional customer service. The bank offers a variety of services including financial services, wealth management, loans and other banking services.
2. ICICI bank: ICICI bank is the second-largest private sector bank in India with market cap of 8.9 lakh crore rupees. The bank has over 6,524 branches and a significant digital presence, serving more than 1.5 million customers.
3. Axis bank: Axis Bank is India’s third-largest private bank, founded on 3rd December 1993. It is a new generation bank with its head office located in Mumbai, India with a market cap of 3.5 lakh crore rupees.
4. Kotak Mahindra bank: Kotak Mahindra bank was first established in 1985 as Kotak Capital Management Finance Ltd and became India’s first non-banking finance company to convert into a commercial bank. Personal finance, investment banking, life insurance and wealth management are the primary services offered by Kotak Mahindra bank.
5. IndusInd bank: IndusInd is India’s first private sector bank that offers personal and corporate banking, loans, credit cards, debit cards, deposits, savings accounts, and more. The name IndusInd bank is inspired by the Indus Valley Civilization and was founded in 1994 by Srichand P Hinduja. The bank serves as a clearing bank for Indian stock exchanges including BSE and NSE.
6. IDBI bank: Industrial Development Bank of India Limited, also referred as IDBI bank was established in 1964 as a Development Financial Institution (DFI) and later transformed into a bank in 2004. Initially, IDBI bank was established to provide financial assistance to industrial sectors and develop Indian economy and until 2019, it was considered a Public Financial Institution. This bank has more than 1,900 branches and 3,700 ATMs across India.
7. Yes bank: Yes bank is India’s private sector bank that offers a range of products and services for retail, MSME, and corporate clients. The bank was founded in 2003 by Rana Kapoor and Ashok Kapur. Yes bank has 1,198 branches 1,287+ ATMs across India.
8. IDFC First bank: Infrastructure Development Finance Company also referred as IDFC bank offers a variety of services, including banking, wealth management, and digital banking. The IDFC bank was named IDFC First bank in 2018 after the merger of IDFC Bank and Capital First.
9. AU small finance bank: Au small finance bank is India’s largest small finance bank offers banking and financial services to individuals, small and micro enterprises, and retail customers. The bank has a customer base of more than 2.7 million and has 900+ banking touchpoints. The bank focuses on providing its services to small and semi-urban areas.
10. Federal Bank: The Federal bank is a private sector bank in India that offers personal, business, and NRI banking services including safe deposit lockers, ECS, and online banking with its 1,504 physical banking branches and 2,015 ATMs across India. The bank was established in 1931 as Travancore Federal Bank and later renamed a federal bank in 1949. Federal bank also has its representative offices in Abu Dhabi and Dubai.

Which is the largest private sector bank in india?

HDFC Bank is the largest private sector bank in india based on total assets exceeding 24 trillion Indian rupees by March 2024, according to the report titled “Leading private banks in India as of March 2024, by asset” published by Sandhya Keelery on Statista.

Which is the second largest private bank in india?

ICICI Bank is the second largest private bank in India with a market cap of 8.82 lakh crore rupees. As of November, 2024, ICICI bank has a total assets of ₹2,364,063 crore.

Currently, ICICI Bank is operating through its network of 6,004 branches and 16,927 ATMs. Moreover, the company’s workforce approximates 130,542 people. The ICICI bank is present in 17 countries, including United Kingdom, Canada, and Singapore.

Which is the third largest private sector bank in india?

Axis bank is the third largest private sector bank in India by assets and fourth-largest by market capitalisation with net sales of 109,368.63 crore rupees, according to the Moneycontrol “Top Companies in India by Net Sales – BSE” updated on November 4, 2024.

Axis Bank provides financial services to the customers including retail banking, corporate banking, wealth management, etc. The bank is also well known for providing innovative technologies for digital banking to its customers. 

What is the history of private sector banks in India?

The history of private sector banks in India dates back to early 1990s when the Narasimham Committee Report of 1991 made suggestion to set up new private sector banks with the main purpose of increasing competition and efficiency in Indian banking sector.

The Reserve Bank of India issued guidelines in 1993 to establish seven new private banks in India which led to the foundation of IndusInd Bank in 1994, as the first private sector bank in India. Later, two more private banks HDFC and Axis bank were established in 1994 followed by the establishment of ICICI bank in 1996.

The list of establishment of 7 new private sector banks as per the recommendations of Narsimham committee-1 (1991) is given in the table below.

#	Private Bank	Year of Establishment
1	Axis Bank	1994
2	Development Credit Bank	1995
3	HDFC Bank	1994
4	CICI Bank	1996
5	Indusind Bank	1994
6	Kotak Mahindra Bank	2003
7	Yes Bank	2005

Globally, the history of private sector banks dates back to several centuries in 1960s when “The Bank of Sweden” was founded in 1668 by a group of private individuals to finance trade and commercial activities.

What are the types of private banks in India?

There are four types of private banks in India including commercial banks, small finance banks, payments banks and cooperative banks.

1. Commercial Banks: A commercial bank is a financial institution that accepts deposits from individuals, as well as from businesses and provide loans to businesses and individuals and make money from loan interest, credit card interest, and fees.
2. Small Finance Banks (SFBs): Small Finance Banks are financial institutions in India that provide access to basic banking services for unbanked and underserved segments of the population. SFBs were established in 2014 by the regulations of the Reserve Bank of India or the RBI with the mail goal to promote financial inclusion by offering banking services to people and businesses not favoured by larger banks, such as small and marginal farmers, small business owners, and people working in the unorganized sector.
3. Payments Banks: Payments Banks are a new type of banking institution in India, introduced by the Reserve Bank of India designed to promote financial inclusion and extending a range of basic banking services to underbanked people. These banks concentrate mainly on basic banking services, offering foundational monetary products across India like deposits, payments, and remittance services and don’t issue loans or credit cards.
4. Cooperative Banks: Cooperative banks refer to financial institutions started to address the capital needs of their specific community and are created and operated by its members. Since most of the members are also the customers, the banks have an opportunity to adopt unique rules and regulations and create unique bonds between staff and the customers. The board members of cooperative banks are democratically selected to oversee the operations. 

Which is the safest private bank in india?

HDFC Bank is the safest private bank in India, followed ICICI bank, as per the article titled “Some of the Safest Banks in India in 2024” published on Bajaj Finserv. HDFC bank has always showed an excellent financial performance, strength in handling risks and has a long history of stability.

The HDFC bank emphasis on innovation and technology which makes it the safest private bank in India.

Which is the fastest growing private bank in india?

HDFC banks is the fastest growing private bank in India with 7,915 branches and 20,565 ATMs. It is also the world’s sixth-largest private bank with a market cap of 13,07,953.56 crore rupees.

HDFC bank was founded in 1994 and is known for innovation, excellent customer service and using technology to improve its services. The services offered by HDFC bank include wealth management, financial aid, home loans, education loans, mutual funds, mortgages, banking services, money transfers, cards, and deposits.

What are the advantages and disadvantages of private banks in India?

The advantages of private banks in India include access to personalized services,  financial solutions such as investment management, wealth planning, insurance coverage, attractive interest rates and reduced fees, and exclusive perks such as concierge services. But, they do have some disadvantages too.

The main disadvantage of private banks in India include high employee turnover rate resulting in problems with relationship building with the client and the bank leading to lack of trust and confidence in the services.

The advantages and disadvantages of private banks are table below.

Advantages of Private Banks in India	Disadvantages of Private Banks in India
Private banks offer faster service, user-friendly technology, innovative products.	Private banks prioritize profit over customer service in some cases.
Private banks offer personalized attention and provide dedicated relationship managers.	Private banks have higher fees and charges.
Private banks have wider range of financial products and services.	Private banks usually do not have branches in rural areas.
Private banks drives efficiency and have better rates.	Private banks sometimes lead to aggressive marketing tactics.
Private banks offer competitive salaries and benefits.	Private banks do not provide job security.
Private banks usually have increased access to banking services in some areas.	Private banks do not prioritize social welfare as much as public sector banks.

What is the difference between a private sector and a public sector bank in India?

The main difference between a private sector and a public sector bank in India is in its ownership structure. In a public sector bank the government owns more than 50% of the bank’s stock, whereas in a private sector bank majority of the bank’s stock is owned by individuals or corporations.

The difference between private sector and public sector banks are given in the table below.

Features	Private Sector Banks	Public Sector Banks
Ownership	Private sector banks are owned by private individuals or companies.	Public sector banks are owned by the government.
Profit Motive	Primarily driven by profit maximization.	Prioritize social and economic development.
Governance	Private banks are managed by a board of directors appointed by shareholders.	Public sector banks are governed by the government.
Financial Flexibility	More flexibility in decision-making and resource allocation.	Limited flexibility due to government regulations.
Customer Service	Private banks offer more personalised and innovative services.	Public sector banks prioritize social welfare over individual customer needs.
Risk Appetite	Private banks are more risk-tolerant.	Public sector banks are more cautious in their lending practices.
Efficiency	Private banks are often more efficient due to competition and market pressures.	Public sector banks are less efficient due to bureaucratic procedures.
Social Responsibility	Private banks focus on corporate social responsibility (CSR).	Public sector banks prioritize social and economic development.

How many types of banks are there in India?

The are nine types of banks in India including central bank, cooperative banks, commercial banks, local area banks, specialized banks, small finance banks, payment banks, domestic systematically important banks (D-SIBs) and NEO banks.