The banking system plays a pivotal role in India's economic ecosystem, mobilising savings for productive activities and promoting inclusive financial development. But the twin forces of global financial interconnectedness and domestic structural vulnerabilities have made robust risk management a cornerstone of banking stability. This article offers a comparative study of risk management structures adopted by public sector banks (PSBs) and private sector banks (PrSBs) in India, highlighting their design, regulatory adherence, efficacy, and governance structure across the major risk categories: credit risk, market risk and operational risk.

Using secondary data from Reserve Bank of India (RBI) annual reports, bank annual reports, Basel Committee reports and peer-reviewed academic literature covering 2015-2024, the research adopts a systematic comparative approach. The study compares a range of financial risk metrics, such as gross non-performing assets (GNPA) ratios, capital adequacy ratios (CAR), return on assets (ROA), net interest margins (NIM), and liquidity coverage ratios (LCR), between the two sectors. It illustrates that despite remarkable gains in regulatory compliance by PSBs post the Insolvency and Bankruptcy Code (IBC) reforms and recapitalisation, private sector banks still exhibit better risk-adjusted performance, finer risk governance frameworks, and more technology integration in risk management.

The paper highlights key deficiencies in risk management practices among PSBs, such as outdated credit appraisal models, political interference in lending decisions and a lack of risk literacy among board members, while noting recent improvements in their GNPA recovery trends. It also highlights that regulatory convergence does not translate into risk culture or risk appetite convergence. The research makes regulatory recommendations for improving risk governance, embracing enterprise-wide risk management (ERM) and driving digital risk analytics in both sectors to achieve financial sustainability