what is the difference between Public sector bank & Private
sector bank
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Answer Posted / sachin j khade.
Private And Public Banks
Banks have been broadly divided into private and public.A
private bank is that in which there are but few partners,
and these attend personally to its management. A public
bank is that in which there are numerous partners or
shareholders, and they elect from their own body a certain
number, who are intrusted with its management.
The business of banking consists chiefly in receiving
deposits of money, upon which interest may or may not be
allowed; in making advances of money, principally in the
way of discounting bills; and in affecting the transmission
of money from one place to another. Banks in metropolitan
cities are usually the agents of the banks in smaller
communities and charge a commission on their transactions.
The disposable means of a bank consist of - First, the
capital paid in by the partners, or shareholders. Second,
the amount of money deposited by their customers. Third,
the amount of notes they are able to keep out in
circulation. Fourth, the amount of money in the course of
transmission - that is, money they have received, and are
to repay, in some distant place, at a future time.
These disposable means are employed - First, in discounting
bills. Second, in advances of money in the form of cash
credits, loans, or overdrawn accounts. Third, in the
purchase of government or other securities. Fourth, a part
is kept in the banker's till, to meet the current demands.
Of these four ways of employing the capital of a bank,
three are productive, and one is unproductive. The
discounting of bills yields interest; the loans, and the
cash credits, and the overdrawn accounts, yield interest;
the government securities yield interest; the money in the
till yields no interest.
The expenses of a bank may be classified thus: Rent, taxes,
and repairs of the building or premises in which the
business is carried on; salaries of the officers;
stationers' bills for books, paper, notes, stamps, etc.;
incidental expenses, as postage, light, heat, etc.
The profits of a bank are that portion of its total
receipts - including discount, interest, dividends, and
commission - which exceeds the amount of the expenses.
Banks as Commercial Institutions. In commercial language a
bank is a repository, or an establishment, for the purpose
of receiving the money of individuals;either to keep it in
security, or to improve it by trafficking in goods,
bullion, or bills of exchange;and, as stated above, it may
be either of a public or of a private nature. A public bank
is generally regulated by certain laws, enacted by the
government of the nation or state, which constitute its
charter, limit its capital, and establish the rules by
which it is to conduct business. A private bank, on the
other hand, is merely a contract among individuals, for
carrying on a trade in money and bills; and the
responsibility of the partners is usually the only security
of those who transact business with it.
Banks then are properly commercial institutions which by
affording credits, or issuing notes, as the representative
of money, enable merchants, with greater facility, to buy
and sell commodities, at home or abroad. The produce of one
country is thus exchanged with that of another, by means of
a medium to which an ideal value is attached; hence the
great utility of banking establishments in all commercial
countries.
Classification of Banks. Private banking is the oldest form
of the banking business and, as is well known, the
antiquity of banks is very great. Records exist of banking
transactions among the Assyrians and in the Metropolitan
Museum in New York there are Babylonian tablets bearing
distinct records of transactions in banking that took place
in the reign of Nebuchadnezzar.
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