Financial Health and Service Quality of Commercial Banks

The Banking sector in India is one of the important pillars of the financial sector, which plays a vital role in the functioning of the economy. A sound financial system is indispensable for a healthy and vibrant economy. The banking sector constitutes a predominant component of the financial services industry, and the performance of any economy, to a large extent, is dependent on the performance of the banks. In 1969, fourteen banks were nationalized to extend credit facilities to all segments of the economy and also mitigated seasonal imbalances in their availability. The Indian financial sector reforms in the 1990s brought unprecedented changes in the banking sector. The interest rate deregulations had opened various financial markets combined with the intensifying competition that was affecting the spread of the banks. The pressures arising on the profitability, capital adequacy, liquidity, productivity, and operational efficiency of the bank could not be tackled on the fire fighting basis.