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Survey of various type of bank accounts, Rates of Interest

A bank is a financial institution that accepts deposits from the public and creates credit. Lending activities
can be performed either directly or indirectly through capital markets. Due to their importance in the
financial stability of a country, banks are highly regulated in most countries. Most nations have
institutionalized a system known as fractional reserve banking under which banks hold liquid assets equal
to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity,
banks are generally subject to minimum capital requirements based on an international set of capital
standards, known as the Basel Accords.
Banking in its modern sense evolved in the 14th century in the prosperous cities of Renaissance Italy but in
many ways was a continuation of ideas and concepts of credit and lending that had their roots in
the ancient world. In the history of banking, a number of banking dynasties – notably, the Medicis,
the Fuggers, the Welsers, the Berenbergs, and the Rothschilds – have played a central role over many
centuries. The oldest existing retail bank is Banca Monte dei Paschi di Siena, while the oldest
existing merchant bank is Berenberg Bank.

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Nationalised Banks

The Base

The history of nationalization of Indian banks dates back to the year 1955 when the Imperial Bank of India
was nationalized and re-christened as State Bank of India (under the SBI Act, 1955). Later on July 19, 1960,
the 7 subsidiaries of SBI viz. State Bank of Hyderabad (SBH), State Bank of Indore, State Bank of Saurashtra
(SBS), State Bank of Mysore (SBM), State Bank of Bikaner and Jaipur (SBBJ), State Bank of Patiala (SBP), and
State Bank of Travancore (SBT) were also nationalized with deposits more than 200 crores.

In the Indian banking scenario, most public sector banks are referred to as Nationalised Banks. This
classification is, however, inaccurate. According to the IMF (International Monetary
Fund), “Nationalisation” is defined as “government taking control over assets and over a corporation,
usually by acquiring the majority stake or the whole stake in the corporation”. In 1949, during the early
years of the country’s independence, India’s central bank, the RBI (Reserve Bank of India) became the first
bank to be nationalised. This was an important move since the RBI would soon become the regulatory
authority for banking in India. Most Indian banks at that time were privately owned. Thus, the Indian
government then recognized the need to bring them under some form of government control to be able to
finance India’s growing financial needs.

Nationalisation in Two Phases

By the early 1960s, the Government of India realized that a significant share of deposits coming from the
masses of India was controlled by 14 privately owned commercial banks. Indian agriculture and industries
were booming and the need for finance was high. Financial regulations were also very important at that
time since those would help shape the nature of the country’s economy for decades to come.
Nationalisation became the watchword even the state airline, Air India, was nationalised in 1953.
Acquisition of the Imperial Bank of India in 1955 was the next big step.

With Mrs. Indira Gandhi’s taking over as the Prime Minister of India, the Indian National Congress rallied
for a state takeover of some of the major banks in the country. In what can be deemed a rather hasty
move, the government promulgated an ordinance - the Banking Companies (Acquisition and Transfer of
Undertakings) Ordinance, 1969 - thereby nationalising all the 14 banks that were under consideration with
effect from the midnight of 19 July 1969. As a follow-up to passing the ordinance, the Banking Companies
(Acquisition and Transfer of Undertaking) Bill was taken up by the Parliament for discussion. It received a
clear majority as well as the assent of the President within a month of issuing the ordinance.

In 1980, when Mrs. Gandhi was re-elected as the Prime Minister for her third term at the PMO, she
initiated the second spate of bank nationalization. This time about six banks were nationalised and the
Government of India controlled over 90 percent of the banking business in the country. Of the 20 banks
that were nationalised, New Bank of India was later (in 1993) merged with Punjab National Bank.

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Why were these banks nationalised?

The nationalization of banks was a significant move undertaken by the government for the development of
the country. Firstly, it instilled public confidence in the banking system encouraging the masses to save and
invest. It allowed for the elimination of regional bias and promoted opening up of branches in the remote
areas of the country as well, thus strengthening the banking network. By elimination of monopoly or credit
competition, nationalization streamlined banking practices in the country, thereby directing funds where it
was most necessary – towards industrial and sectoral development – as planned by the RBI and the Indian

Nationalised banks in India

1. Allahabad Bank: Founded in 1865, this is one of the oldest established joint stock banks in India.
Allahabad Bank was nationalised on July 19, 1969. The bank's total in 2016 was approximately Rs
18,884.94 crores.

2. Andhra Bank: Andhra Bank was founded in the year 1923. It is a medium-sized public sector bank which
was nationalized in April 1980. The turnover of this bank for the year 2016 was around Rs 18027.42 crores.
Andhra Bank was the pioneer of credit cards in India.

3. Bank of Baroda: This bank was established in 1908, some 109 years ago. The turnover raised by this
bank was Rs 42199.92 crores in 2016. Services offered by this bank are international banking and financial
services. The bank's headquarter is situated in Vadodara, Gujarat. It was nationalised in 1969.

4. Bank of India: Bank of India was established in the year 1906 and was nationalised in the year 1969. This
commercial bank is growing rapidly and provides exclusive financial services to its consumers. Situated in
Mumbai, Maharashtra, this bank earned a turnover of Rs 41796.47 crores in the year 2016.

5. Bank of Maharashtra: This bank was founded in the year 1935 and its headquarter is in Pune, India. It is
a private sector bank, which has the largest number of branches in the state of Maharashtra. Bank of
Maharashtra was nationalised in the year 1969 and accumulated a total turnover of Rs 13052.98 crores in
the year 2016.

6. Canara Bank: Canara Bank is one of the oldest public sector banks. The bank has branches in other
countries such as Hong Kong, Shanghai, Moscow, etc. It was established in the year 1906 and was
nationalised in the year 1969. The total turnover generated by this bank was Rs 48942 crores in 2016.
7. Central Bank of India: It was founded in the year 1911 and was nationalized in 1969. The headquarter of
this bank is in Mumbai, the financial capital of India. The bank earned a turnover of Rs 25887.89 crores in

8. Corporation Bank: Corporation Bank is 111 years old. It was established in the year 1906. Its
headquarter is in Mangalore and also has representative branches in Hong Kong, Dubai etc. This bank was
nationalised in the year 1980 and produced a turnover of Rs 19441.24 crores in 2016.

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9. Dena Bank: This bank was founded in 1938 by Devkaran Nanjee and was nationalised in 1969. It
generated a total turnover of Rs 10645.73 crores in 2016, although in 2017 it has started making losses. It
is headquartered in Mumbai, India.

10. Indian bank: One of the top performing public sector banks in India, Indian Bank was founded on 15
August 1907. It has its headquarters in Chennai, India. It also has overseas branches in Colombo and
Singapore. The bank was nationalized in 1969 and generated revenue of Rs 7370.16 crores in 2016.

11. Indian Overseas Bank: This major public sector bank is situated in Chennai, India, and provides banking
services at various places like Dubai, Bangkok, Shanghai, to name a few. It was established in the year 1937
and was nationalized in 1969. The total turnover of this bank is Rs 23517.29 crores in 2016.

12. Oriental Bank of Commerce: OBC or Oriental Bank of Commerce was founded in Lahore in 1943.
Currently, it is headquartered in Gurugram, India. It has generated a turnover of Rs 20,058.71 crores in
2016. It was nationalised in the year 1980.
13. Punjab and Sind Bank: This bank was founded in 1908 and provides banking and financial services all
over India. The bank generated a turnover of Rs 8744.34 crores in 2016. Punjab and Sind Bank was
nationalised in the year 1969.

14. Punjab National Bank: Punjab National Bank was founded in the year 1894 and is one of the oldest
banks. It has its branches in UK, Dubai, Kabul etc. It was nationalised in the year 1969. The total turnover
earned by this bank in 2016 was Rs 47424.35 crores.

15. Syndicate Bank: Syndicate bank was nationalised in the year 1969 and is one of the major banks in
India. It has its headquarters in Manipal, India. The turnover generated by Syndicate bank in 2016 was Rs
6913.09 crores.

16. UCO Bank: UCO Bank or United Commercial Bank was established in 1943. This bank was nationalized
in 1969. It had a turnover of Rs 18560.97 crores in the year 2016 and is one of the most trusted banks in

17. Union Bank of India: This bank was initiated in 1919 and was nationalized in 1980. It generated a
revenue of Rs 32198.80 crores in the year 2016. It has its representative offices in Shanghai, Abu Dhabi,
Beijing, etc.

18. United Bank of India: United Bank of India was founded 1950 and was nationalised in 1969.
Headquartered in Kolkata, this bank was able to generate a turnover of Rs 9936.67 crores in 2016.

19. Vijaya Bank: This bank was established in 1931 in Mangalore, India, but now has its headquarters in
Bengaluru. It generated a revenue of Rs. 12379 crores in the year 2016. It was nationalized in the year
1980. It provides facilities like consumer banking, corporate banking, banking and finance services etc.

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Private bank

Private banks are the banks owned by either the individual or a general partner(s) with limited partner(s).
Private banks are not incorporated. In any such case, the creditors can look to both the "entirety of the
bank's assets" as well as the entirety of the sole-proprietor's/general-partners' assets.
The private sector banks in India are banks where the majority of the shares or equity are not held by the
government but by private share holders.
In 1969 all major banks were nationalised by the Indian government. However, since a change in
government policy in the 1990s, old and new private sector banks have re-emerged. The private sector
banks are split into two groups by financial regulators in India, old and new. The old private sector banks
existed prior to nationalisation in 1968 and kept their independence because they were either too small or
specialist to be included in nationalisation. The new private sector banks are those that have gained their
banking license since the change of policy in the 1990s.
The Nedungadi Bank was the first private sector bank in India, founded in 1899 by Rao Bahadur T.M. Appu
Nedungadi in Kozhikode, Kerala.
List of the old private sector banks in India
Name Year Established
1. City Union Bank 1904
2. Karur Vysya Bank 1916
3. Catholic Syrian Bank 1920
4. Tamilnad Mercantile Bank 1921
5. Nainital Bank (Wholly owned subsidiary of Bank Of Baroda) 1922
6. Karnataka Bank 1924
7. Lakshmi Vilas Bank 1926
8. Dhanlaxmi Bank 1927
9. South Indian Bank 1929
10. Federal Bank 1931
11. Jammu and Kashmir Bank 1938
12. RBL Bank 1943
1. ICICI Bank 1994
2. Axis Bank 1993
3. HDFC Bank 1994
4. IndusInd Bank 1994
5. Kotak Mahindra Bank 2003
6. Yes Bank 2004
7. IDFC First Bank 2015
8. Bandhan Bank 2015
9.DCB Bank 1930
10.IDBI Bank 1964

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What is the difference between a nationalised bank and a private bank?

“All Private Banks are Nationalised Banks and all Nationalised Banks are not Private Banks”.
Nationalised public sector bank is a Bank which was governed by semi-government or quasi-government
as the 50% or more of the funds were from the Central Government operations and remaining 50% or less
or more can be brought into the system from public equities from open market.

Here the policies were set by the Government elected body as per the RBI guidelines.
Whereas, private sector bank is a bank which was governed by purely a set of private organisation formed
under Banking and companies act of India and 100% of the funds are from a group of
individuals/companies/trusts/organisations etc., also from open market.

Here the policies were set by the Board of Directors of the company and banking experts as per the RBI

1. Bank Processing fees

This fees is charged to analyse, evaluate and do the paperwork for your loan processing. Even though the
bank is selling you the product, they don’t take this cost on them.

Private Bank

Method 1: Lump sum amount based on the amount of loan (e.g. INR 5000 for loans upto 20 lakhs)
Method 2: Percentage of the total loan amount (0.25% of the total loan amount).
Most of the private sector bank depend on the their DSA (Direct selling agents) to get the loan consumer
to their doorstep, they generally keep this fees high (like 0.50% – 1% ) to pay a cut of this fees to their

Government Bank
They are NOT aggressive in entertaining DSAs and hence have their processing fees generally low and
starts from 0.25% or a fixed amount.

2. Paper work, efficiency and turnaround time

Private Bank
Better management and faster processing times than their counterparts. Their DSA’s have strict sales
target every month and hence move faster to reach sales goals.

Government Bank
They are NOT bothered about their performances most of the time. So, they move a lot slower but are
steady in their process.

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3. Interest rates fluctuation

Private Bank
Interest rates are increased by private bank as soon as RBI (Reserve bank of India) increases its REPO rate,
but do NOT decrease with same speed at least for existing loan customers.
Government Bank
The interest rate policies are more transparent in public sector banks than private banks.
They keep same policies for all loan customers and decreased rate is effective for existing customers also
almost immediately.

4. Prepayment charges

Private Bank
Read the terms and conditions carefully, they DO NOT allow you to prepay the loan without the
prepayment charges. Obviously, they are loosing interest money if they allow you to prepay.
So, to mitigate the loss, they generally charge you 2% of the OUTSTANDING loan.
Yes, I said OUTSTANDING. i.e. if you have an outstanding loan of 10 lakhs and you are making a pre-
payment of 2 lakhs, you need to pay them 2% of 8 lakhs as pre-payment charges.
That’s a whopping Rs. 16,000 penalty to reduce your loan by 2 lakhs.

Government Bank
Public sector banks do NOT charge you a penny to prepay (read their terms and conditions). So, they score
a plus point for me here.

5. Prepayment Period

Private Bank
Normally, they add a clause that you cannot pre-pay ANY amount before completing 180 day (6 months) of
your loan. Clever…because the EMI’s are designed in a way that the interest portion is maximum at initial
stages of loan, this helps the bank earn maximum interest before you actually make any pre-payment.

Government Bank
Good news: They do NOT have any such clause. You can start pre-paying from day 2 of loan itself.
At-least I do not know of any bank which has a minimum period clause in this space. Another big plus
towards public sector banks.

6. Pre-payment Penalty Amount

Private Bank
They are too concerned about pre-payments as it is a loss of income. Generally, you cannot pre-pay more
than 25% of outstanding loan in a single year. i.e. if you have taken a loan of 10 lakhs, you cannot pre-pay
more than 2.5 lakhs in a single year.

Government Bank
Again, no such clause here. You can pre-pay any amount which you like.
This is helpful if you have got some lump sum amount from some other source of income and want to
reduce your loan.
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7. Charges for dealing in branch office

Private Bank
Got the loan, but don’t come to branch. If you do, you will be charged for any transaction you do at their
branch. Most of the private sector banks charge an amount of Rs. 100 plus tax for entertaining you at their
branch after certain number of visits.
They want you to use their ATM’s and online banking to transact. Off course, it saves their operations cost.

Government Bank
No such policy here again. Visit them any number of times and they will be able to help you.



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