The banking system in India is significantly different from that of other Asian nations
because of the country’s unique geographic, social and economic characteristics. India
has a large population and land size, a diverse culture, and extreme disparities in income
which are marked among its regions. There are high levels of illiteracy among a large
percentage of its population, but at the same time, the country has a large reservoir of
managerial and technologically advanced talent. Between about 30-35% of the
population resides in metro and urban cities and the rest is spread in several semi-urban
and rural centers. The country’s economic policy framework combines socialistic and
capitalistic features with a heavy bias towards public sector investment. India has followed
the path of growth-led exports rather than the ‘export-led growth’ of other Asian
economies, with emphasis on self-reliance through import substitution. These features
are reflected in the structure, size, and diversity of the country’s banking and financial
sector. The banking system has had to serve the goals of economic policies enunciated in
the successive five-year development plans, particularly concerning equitable income
distribution, balanced regional economic growth, and the reduction and elimination of
private sector monopolies in trade and industry. In order to serve as an instrument of
state policy, the banking industry was subjected to various nationalization schemes in
different phases (1955, 1969, and 1980). As a result, banking remained internationally
Service Quality Versus Customer Satisfaction in Banking Sector: 67
A Literature Review
isolated (few Indian banks had presence abroad in international financial centers) because
of preoccupation with domestic priorities, especially massive branch expansion and
attracting more people to the system. Moreover, the sector has been assigned the role of
providing support to other economic sectors such as agriculture, small-scale industries
exports, and banking activities in the developed commercial centers (i.e., metro, urban,
and a limited number of semi-urban centers).