The effects of traditional practices on modern banking system

Abstract

Purpose – The purpose of this paper is to identify the traditional practices in the modern banking system (MBS) and examine the effects of these on employee response, customer reactions and customer loyalty, in the context of public sector banks in India. The study also investigates the effects on customers of employees’ use of traditional banking practices in the MBS. Design/methodology/approach – A total of 460 usable responses were gathered from customers of seven public sector banks in Bhopal (MP), India. The study scales were refined and validated by exploratory factor analysis and confirmatory factor analysis. Findings – The results indicated that the MBS utilising traditional practices (MBSTP) significantly influences unfavourable employee responses, customer reactions and loyalty. In addition, employee responses in MBSTP motivate and generate unfavourable reactions of customers, which further influence their loyalty adversely towards public sector banks. Practical implications – The identified traditional practices with MBS are expected to bring clarity to the issue of employee response, customer reaction and loyalty. This would help the management of banks. Originality/value – The results of the analysis indicated that public sector banking services are facing the internal challenges by its own service processes and employees’ behavioural intentions.