Public Sector Banks in India

Public Sector Banks are banks where the majority stake (over 50%) is held by the government. The government’s entry into banking began with the nationalization of the Imperial Bank of India in 1955, transforming it into the State Bank of India (SBI) with a 60% RBI stake. Further nationalization came on July 19, 1969, when 14 major private banks (with deposits over ₹50 crore) were nationalized, followed by 6 more in 1980.

These steps brought 84% of bank branches under government control by 1969, expanding rural outreach and aligning banking with social welfare goals. By 1991, public banks held about 90% of India’s banking sector assets. Banking reforms in 1991–92 opened the door for new private banks, but PSBs remained dominant through the 1990s.

Number and Ownership

After decades of expansion, consolidation has reduced the number of PSBs. In 2017 there were 27 PSBs, but a merger drive (2017–2020) cut this to 12 PSBs. Notably, SBI merged its associate banks and Bharatiya Mahila Bank in 2017. Another major consolidation effective April 2020 merged nationalized banks (e.g. Allahabad Bank into Indian Bank, Syndicate into Canara, etc.). Today, 12 PSBs remain as follows:

The Government of India (via the Ministry of Finance) is the majority shareholder in each, typically holding 55–95% ownership. Shares of PSBs are publicly traded, but government ownership and control ensure a public mandate. Key laws governing PSBs include the SBI Act 1955 and the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970/1980 which enabled nationalization.

Bank Profiles

State Bank of India (SBI)

State Bank of India is India’s largest public sector bank and financial institution. It traces its origin to the Bank of Calcutta (1806) and was nationalised in 1955. SBI plays a crucial role in government banking, financial inclusion, credit flow, and international banking operations.

Canara Bank

Founded in 1906 by Ammembal Subba Rao Pai, Canara Bank is a major public sector bank headquartered in Bengaluru. It is known for early adoption of social banking, priority sector lending, and digital initiatives. It merged with Syndicate Bank in 2020.

Bank of Baroda

Established in 1908 by Maharaja Sayajirao Gaekwad III, Bank of Baroda is a leading public sector bank with strong international presence. It merged with Dena Bank and Vijaya Bank in 2019, strengthening its scale, global reach, and corporate banking capacity.

Punjab National Bank (PNB)

Founded in 1894, Punjab National Bank is one of India’s oldest public sector banks. It merged with Oriental Bank of Commerce and United Bank of India in 2020. PNB is significant in MSME, agriculture, and government-backed credit schemes.

Bank of India

Bank of India was established in 1906 and nationalised in 1969. It has a notable overseas presence and plays an important role in trade finance and corporate lending. The bank actively supports priority sector lending and government financial inclusion programmes.

Indian Bank

Founded in 1907, Indian Bank is headquartered in Chennai. It merged with Allahabad Bank in 2020, enhancing its balance sheet and pan-India reach. The bank is known for strong retail banking, digital services, and relatively stable asset quality.

Union Bank of India

Union Bank of India was established in 1919 and nationalised in 1969. After merging with Andhra Bank and Corporation Bank in 2020, it became one of India’s largest PSBs. It plays a key role in retail, MSME, and infrastructure financing.

Bank of Maharashtra

Founded in 1935, Bank of Maharashtra has a strong regional presence, especially in western India. It is known for disciplined lending practices, improved profitability, and focus on MSMEs and priority sectors. It has emerged as one of the better-performing PSBs.

UCO Bank

UCO Bank was established in 1943 and nationalised in 1969. Headquartered in Kolkata, it has a strong presence in eastern and northeastern India. The bank focuses on priority sector lending, financial inclusion, and supporting government welfare schemes.

Central Bank of India

Established in 1911, Central Bank of India was the first Indian commercial bank fully owned and managed by Indians. It has an extensive rural and semi-urban network and plays an important role in agriculture, MSME lending, and government banking.

Indian Overseas Bank

Founded in 1937, Indian Overseas Bank was set up with a focus on overseas banking and foreign exchange. Headquartered in Chennai, it supports international trade, remittances, and NRI banking, alongside domestic retail and priority sector lending.

Punjab and Sind Bank

Established in 1908, Punjab & Sind Bank has a strong presence in northern India. It primarily focuses on retail, MSME, and priority sector lending. The bank plays an active role in financial inclusion and implementation of government social security schemes.

Role in the Indian Economy

PSBs have a profound presence in India’s economy, accounting for roughly 60% of total banking assets as of 2024. They boast the widest branch networks, particularly in rural and semi-urban areas, facilitating financial inclusion. Historically, PSBs have been vehicles of social banking – offering subsidized credit to agriculture, small industries, and underprivileged sections in line with government schemes. They fulfill priority sector lending targets (40% of loans to priority sectors) and drive programs like Jan Dhan Yojana (mass account opening), credit for self-help groups, and rural development programs.

Despite competition, PSBs remain pivotal in mobilizing household savings (through deposits) and channeling credit into the economy’s productive sectors. They also handle government business – e.g. distributing pensions, Direct Benefit Transfers (DBT), and collecting taxes – underscoring their significance in public policy implementation.