Stabilization and Structural Adjustment Program of 1991 has brought unprecedented changes in the Indian economy. The post policy initiatives resulted in the abolition of licensing policy, de-reserving the areas for the participation of private entities, disinvestment of government investments in public sector organizations, opening up of the Indian economy for global players in various sectors, disintermediation in the financial markets, reducing the role of public financial institutions, and the emergence of new-generation private sector banks. This paper examines the impact of the entry of new-generation private sector banks on the performance of public sector banks, by analyzing 29 performance-related ratios for 12 years (2004-05 to 2015-16), relating to these banking groups, to determine whether there is any significant difference in their performance. The results indicate that new-generation private sector banks are able to show better performance by judiciously sourcing the funds either from public/market at a cheaper rate of interest and deploying them on deserving assets at less operational costs. The competition warranted the public sector banks to improve their performance, to comply with the profitability considerations and as well realize the social obligations.