What are Public Sector Banks?
Public Sector Banks (PSBs) are financial institutions in which the majority stake more than 50% of the ownership lies with the government. In India, this means either the Union Government or state governments own the controlling shares. As part of the broader Banks Section within the Banking Industry (itself a component of the Banking and Finance Industry), PSBs play a pivotal role in channeling public savings into productive sectors, supporting government policies, and fostering financial inclusion. Because the government holds the majority stake, PSBs are expected to operate not only with profitability in mind but also with social objectives such as serving underserved regions, financing agriculture, and implementing welfare schemes.
Public Sector Banks in India
India’s history with public sector banking dates to the pre-independence era, but it was the nationalization moves of 1969 and 1980 that truly shaped today’s landscape. In July 1969, 14 large private banks were nationalized, bringing them under government control to ensure that banking services reached rural areas and priority sectors such as agriculture and small industries. In April 1980, six more banks were nationalized. Over subsequent decades, many of these banks merged with one another to form larger entities, strengthening balance sheets and optimizing operations.
As of 2025, India has 12 major Public Sector Banks after various amalgamations:
- State Bank of India (SBI)
- Punjab National Bank (PNB)
- Bank of Baroda (BoB)
- Canara Bank
- Bank of India (BoI)
- Union Bank of India
- Indian Bank
- Central Bank of India
- UCO Bank
- Bank of Maharashtra
- Punjab and Sind Bank
- Indian Overseas Bank
These PSBs together account for a significant portion of the country’s total banking assets, deposits, and advances. While private-sector counterparts focus more heavily on urban markets and high-value corporate customers, PSBs maintain a balanced approach: serving both rural and urban customers, implementing government welfare schemes, and providing affordable credit to small farmers, micro-entrepreneurs, and weaker sections of society.
Benefits of Public Sector Banks
- One of the foremost benefits of Public Sector Banks is the trust that comes from government backing. Many individuals especially in semi-urban and rural areas feel secure depositing their money in a bank where the government owns the controlling stake. This perceived safety often translates into higher deposit mobilization, which PSBs then channel into loans or government-sponsored programs.
- Another key advantage is their mandate to promote financial inclusion. PSBs have a network of branches in remote villages and towns that private banks may consider unprofitable. By maintaining these branches, they ensure rural households and small businesses can access formal banking services such as savings accounts, low-cost credit, and government benefit transfers.
- Because PSBs often follow government directives on priority sector lending, they provide credit at relatively lower interest rates to agriculture, small enterprises, education, and weaker socio-economic groups. This not only helps farmers invest in seeds, fertilizers, and irrigation but also enables micro-enterprises to set up or expand operations. Many small entrepreneurs rely on PSBs for collateral-free or subsidized loans, which might be hard to secure elsewhere.
- PSBs play a major role in implementing social welfare schemes. Either it is the Pradhan Mantri Jan Dhan Yojana (PMJDY) bank account for financial inclusion or direct benefit transfers for subsidies, PSBs act as the distribution channel. Their extensive reach and government affiliation make them ideal for disbursing pensions, scholarships, and insurance payouts under various central and state government programs.
Features of Public Sector Banks
Government Ownership and Board Structure: In PSBs, the government holds a majority share often over 75% in many cases giving it the power to appoint the board of directors, including the Chairperson and Managing Director. This ensures that PSBs follow national priorities and regulations set by the Reserve Bank of India (RBI) and the Ministry of Finance.
Priority Sector Lending (PSL): PSBs are required to allocate a fixed percentage of their total lending to “priority sectors” such as agriculture, micro and small enterprises, education, housing, and renewable energy. The target percentage is set by RBI (currently 40% of total Adjusted Net Bank Credit), and meeting these targets is both a regulatory requirement and a social obligation.
Wide Branch Network: One hallmark of PSBs is their vast network of branches often numbering in the tens of thousands spread across cities, small towns, and even remote villages. This physical presence enables them to serve customers who might otherwise be excluded from formal banking. Along with physical branches, PSBs have invested heavily in strengthening their digital channels (Internet banking, mobile apps) to complement branch services.
Social Welfare Mandate: Because PSBs are instruments of government policy, they often offer concessional loans, subsidies, and financial literacy programs. For example, many PSBs run rural outreach camps, farmer credit fairs, and self-help group meetings to educate customers about banking products, encourage savings habits, and ensure that government benefits reach the intended recipients.
Regulated by RBI and Government: Like all scheduled commercial banks, PSBs must adhere to RBI’s prudential norms such as maintaining minimum capital adequacy ratios, provisioning for bad loans, and following know-your-customer (KYC) guidelines. They execute government schemes like Mudra loans (for micro enterprises) and the Atmanirbhar Bharat package, which often come with subsidized interest rates or partial credit guarantees.
Examples of Public Sector Banks in India
State Bank of India (SBI): SBI is the largest bank in India by assets, deposits, and branch network. It traces its origins to the Bank of Calcutta (1806), making it one of the oldest banks in the country. Today, SBI has over 22,000 branches and provides a complete suite of banking and financial services, from retail loans to corporate banking, treasury operations, and international banking. Its sheer size and government backing make it the first choice for many Indians.
Punjab National Bank (PNB): As the first Indian bank to be started solely with Indian capital and management, PNB has a long legacy dating back to 1894. After merging with Oriental Bank of Commerce and United Bank of India, PNB now operates more than 11,000 branches. It offers services such as home loans, education loans, farm loans, and digital banking solutions for retail and corporate clients.
Bank of Baroda (BoB): Established in 1908, Bank of Baroda has grown into one of the top three PSBs in India, especially after integrations with Dena Bank and Vijaya Bank. BoB has a presence in over 20 countries, serving NRIs and facilitating international trade. Domestically, it offers a range of products including savings and current accounts, gold loans, and vehicle financing, while also focusing on technology-driven initiatives.
Canara Bank: Founded in 1906 and nationalized in 1969, Canara Bank has about 10,000 branches across India. It is known for initiatives like the “Canara Micro Business Loan,” which provides collateral-free finance to micro-enterprises, and “Gram Seva,” a rural banking pilot project that offers doorstep banking services in remote areas. Canara Bank also emphasizes digital innovation through its mobile banking app and upgraded ATM network.
Union Bank of India: Established in 1919 and nationalized in 1969, Union Bank is one of India’s premier PSBs with over 9,500 branches. Union Bank has merged with Corporation Bank and Andhra Bank, making its customer base and branch network even larger. It provides services ranging from personal banking such as savings accounts and gold loans to agricultural credit and corporate finance.
Bank of India (BoI): BoI was founded in 1906 and nationalized in 1969. It has more than 6,500 domestic branches and is known for its focus on industrial lending, especially to medium and large enterprises. BoI has been expanding its retail presence through digital products like “MOBIK.” It has also launched various schemes aimed at women entrepreneurs and self-help groups.
Indian Bank: Although tracing its history back to 1907, Indian Bank merged with Allahabad Bank in 2020, creating a larger entity with around 12,000 branches. Headquartered in Chennai, it has a significant presence in South India. Indian Bank focuses on retail banking, priority sector lending, and MSME financing, and actively promotes digital services like UPI (Unified Payments Interface) and Internet banking.
Central Bank of India: Established in 1911, Central Bank was the first bank wholly owned and managed by Indians. It was nationalized in 1969 and today operates more than 4,600 branches. It is noted for schemes such as Kisan Credit Card (for farmers) and educational loans under the “Vidya Lakshmi” portal. Central Bank also concentrates on financial literacy programs in rural areas.
UCO Bank: Established in 1943 and nationalized in 1969, UCO Bank has over 3,500 branches. It operates a specialized branch known as the “UCO Digital Branch,” which provides paperless banking using digital signatures and biometric authentication. UCO Bank also emphasizes priority sector lending especially to self-help groups and women entrepreneurs.
Bank of Maharashtra: Founded in 1935 and nationalized in 1969, Bank of Maharashtra has around 2,000 branches, primarily across the state of Maharashtra. It offers specialized loan products for microfinance groups, educational loans, and loans for social sectors. It partners with Self Help Groups and NGOs to extend credit to underprivileged communities.
Punjab & Sind Bank: Established in 1908 and nationalized in 1980, Punjab & Sind Bank operates more than 1,400 branches. It emphasizes agricultural lending, MSME financing, and retail banking. It also offers an “All India Rural Financial Inclusion Scheme” to facilitate banking services in villages.