Public sector bank
Also called: PSB · Topic: Banking Regulation, NPAs and Financial Stability · NCERT: Beyond NCERT
Meaning
A public sector bank (PSB) is a bank in which the government owns more than 50% of the shares. Many PSBs were created when private banks were nationalised in 1969 and 1980. PSBs matter because they carry "social banking" goals, such as rural branches and credit to farms. Their weak loan quality was also at the centre of India's NPA crisis. The FDI cap for PSBs is 20%.
Example
The State Bank of India was formed from the Imperial Bank in 1955. Mergers cut the number of PSBs from 27 to 12. The main rounds were the SBI associates (2017), Bank of Baroda with Vijaya and Dena (2019) and the April 2020 mega-merger. Budget 2021-22 announced that two PSBs would be privatised.
Don't confuse with
- Private sector bank: most of its shares are privately owned, and its FDI cap is 74%, compared with 20% for PSBs.
Related concepts
- Scheduled bank
- Urban cooperative bank
- Universal banking
- Narrow banking
- Financial repression
- Islamic banking