Perceived Service Quality and Customer Satisfaction in a Public Sector Bank of India-A Study

Abstract

The economic liberalization and the globalization policies have unlocked the floodgates of the Indian economy for the invasion of a number of foreign banks into Indian market, resulting in intense competition in the banking industry. As a result, the banks have realized, that the key to achieving sustainable competitive advantage in today' s markets is to build relationships with customers by serving them in excellent fashion ....... not just selling them. Of late, the banks have been coming out with a number of innovative value addition functions to have the cutting edge over others. Of customers who switch suppliers 40% are likely to do so for service reasons ....... only 8% are likely to switch for price or product reason 1. The response of the Indian banking system to the reforms in the sector, has by and large been creditable, however, the worries of Indian Banks are far from over. This is in particular with public sector banks, which account for 85 percent of entire banking business in India. The share of public sector banks, with respect to the deposits and advances have steadily been going down since 1992-93, from 87.89% deposits and 89.32% advances to 86.83% and 87.30% during 1993-94; 86.49% and 85.82% during 1994- 95; 85.39% and 82.36% during 1995-96 and 83.60% and 65.66% deposits and advances respectively during 1996- 97. As per the survey ofKPMG Peat Marwick with Business Today, 69% of the Indian Banks have been classified as the worst Banks. The steady decline in deposits and advances in public sector banks is a clear indication of shifting of customer loyalty. Thus, the Indian banking Industry is sending an alarming signals to the policy makers and the government, demanding immediate attention to stem the rot, at an earliest stage possible. Therefore, the study examined the Indian banking industry from the angle of service quality and customer satisfaction in Indian banks, with the following objectives: To find out the relative importance of SERVQUAL determinants To examine the gaps in the service quality. To measure the customer satisfaction.