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Service quality assessment in banking industry of India: A comparative study

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European Journal of Social Sciences – Volume 16, Number 4 (2010)

Service Quality Assessment in Banking Industry of India: A

Comparative Study between Public and Private Sectors

Uma Sankar Mishra

Siksha ‘O’ Anusandhan University, Bhubaneswar, India, PIN-751030
E-mail: [email protected]

Kalyan Kumar Sahoo

Siksha ‘O’ Anusandhan University, Bhubaneswar, India, PIN-751030
E-mail: [email protected]

Satyakama Mishra
Siksha ‘O’ Anusandhan University, Bhubaneswar, India, PIN-751030
E-mail: [email protected]

Sujit Kumar Patra

Siksha ‘O’ Anusandhan University, Bhubaneswar, India, PIN-751030
E-mail: [email protected]

Abstract
The banking industry of India is now running in a dynamic challenge concerning both
customer base and performance. Service quality, customer satisfaction, customer retention,
customer loyalty and delight are now the major challenges in gripping the banking sector.
Service quality plays a major role in getting customer satisfaction and creating brand
loyalty in banking sector. Most of the literature reviews referred in the paper reveals that as
compared to public sector, private sector bank customers’ level of satisfaction is
comparatively more in India. Human element acts an important role in perceived service
quality as well as satisfaction. Public sector banks need to redefine the customer service
parameter in order to compete with the nationalized private sector banks both in
profitability and corporate image. This study is just a small step in understanding the multi
dimensional construct of service quality and its implications in competitive environment.
This paper attempts to extract few dimensions of service quality as perceived by bank
customers and compares with five major dimensions already extracted in past literature.

Keywords: Service quality, SERVQUAL, Bank, India

1. Introduction
The financial reform process initiated in 1991, poses lot of challenges before the banking sector in
India as never before. After nationalisation of commercial banks in India in 1969 and 1980, the
ownership of major commercial banks was taken over by the Government. Then, the Government
decided the agenda for action, directing the flow of credit and even determining the pattern of credit
flows to specific sector (Joshi & Joshi, 1998). After nationalisation, competition was restricted and the
banking sector was insulated from world financial markets. Over a period of time, the prevailing
environment created a mindset, where one began to look for guidance for every thing. There was a
comfort among the bankers when approval, guidance or confirmation of actions taken was received
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from the higher authority. The banking personnel have completely lost their vigour and stopped
thinking and operating like business organisation.
A country without efficient and profitable financial markets suffers from multiple
disadvantages in a more open world. When India opened up its financial markets in the early 1990s,
the weaknesses in its financial sector were exposed. It was not able to attract foreign investment,
suffered worst in real interest rates in an attempt to attract capital, riddled with the threat of capital
flight and erosion of tax base. Another significant aspect is the gradual weakening of the financial base
of the banks and over loaded with non-performing loans. In matters relating to adoption of technology
and handling difficult issues like credit proposals and personnel matters; the public sector banks face
the thorny path. The situation was further worsening with increasing competition because of the entry
of new players and the impact of changing environment. In issues like changing the attitude of
personnel and developing strategies for survival of both the strong and weak banks are more justified.
All banks look back in order to learn from the corporate failures of the past while designing their future
strategies, more so for the public sector banks.
With the entry of new generation tech-savvy private banks and the expansion of operations of
foreign banks, the banking sector has become too competitive. The ‘one for all’ and ‘all for one’
syndrome is being given a go-by. To deal with the emerging situations, bankers have to shed a lot of
old ideas, change in practices, develop customer loyalty programmes, and adopt a distinct approach to
meet the challenges ahead. In a fiercely competitive market, non-price factors like customer service
become more important (Kotler, 2003). Hence, it is desirable for banks to develop a customer-centric
approach for future survival and growth. The awareness has already dawn that prompt, efficient and
speedy customer service alone will tempt the existing customers to continue and induce new customers
to try the services offered by a bank. Indian banks have already taken lot of initiatives in this regard.
Further, it has been realised that Indians banks have miles to go to capture the recent trends and to be at
par with the Western counterparts. As a result, many banks have introduced new customer friendly
measures like 24-hour banking, 7-day and anywhere banking, internet banking, extended business
hours, ATM network, etc. It is important to continuously build on this goodwill in the months to come.
In today’s competition in Indian banking industry, customers have to make a choice among
various service providers by making a trade-off between relationships and economies, trust and
products, or service and efficiency (Sachdev et al, 2004). Customers are increasingly aware of the
options on offer in relation to the rising standards of service (Krishnaveni et al, 2004). In this context,
expectations rise and customers become more critical of the quality of service. Service quality,
customer satisfaction, customer retention and delight are now the major challenges in gripping the
banking sector in India. Again, the deregulation in this sector created a great change in present
scenario. In addition to the service diversification, the idea of customer satisfaction and formulation of
marketing strategies to drag the customer towards the banks are now the key issues in order to survive
(Aurora et al, 1997). Level of customer satisfaction is becoming the major target of banks to increase
the market share. More specifically, the cost of retaining existing customers by enhancing the products
and services that are perceived as being important is significantly lower than the cost of winning new
customers (Krishnan et al, 1999). Customer satisfaction is nothing but an outcome of purchase and use
resulting from the comparison of the rewards and costs vis-à-vis customers’ expectations and actual
performance of the product purchased in relation to the expected consequences (Anderson et al, 1994;
La Barbera et al, 1983). Customer satisfaction is a measure of extent the existing bank is fulfilling the
general expectations of a customer and how far and/or close does the existing bank come to the
customer’s ideal bank in his mind (Beerli et al, 2004). Customer satisfaction can be viewed as the
future intentions of customers towards the service provider, which is more or less related to the attitude
(Levesque T et al, 1996). Recently, there has been a keen interest, especially in banking, where banks
are looking at the life time value of the customer base rather than focusing on the cost of transactions
(Ambler, 1995). Customers perceive services in terms of the quality of the service and how satisfied
they are overall with their experiences (Zeithaml and Bitner, 2003). Satisfaction is the consumer’s

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fulfilment response (Oliver, 2003). Customer satisfaction is influenced by price, product quality;
service quality and brand image (Wirtz, 2002).
In the light of the research findings, interest in service quality is, thus, unarguably high. Poor
quality places a firm at a competitive disadvantage. If customers perceive quality as unsatisfactory,
they may be quick to take their businesses else where. Thus, it is clear that service quality offers a way
of achieving success among competing services, particularly in the case of firms that offer nearly
identical services, such as banks, where establishing service quality may be the only way of
differentiating oneself. Such differentiation can yield a higher proportion of consumers’ choices and,
hence, mean the difference between financial success and failure.

2. Servqual Scale
Though initial efforts in defining and measuring service quality emanated largely from the goods
sector, a solid foundation for research work in the area was laid down in the mid-eighties by
Parasuraman, Zeithaml and Berry (1985). They were amongst the earliest researchers to emphatically
point out that the concept of quality prevalent in the goods sector is not extendable to the services
sector. Being inherently and essentially intangible, heterogeneous, perishable, and entailing
simultaneity and inseparability of production and consumption, services require a distinct framework
for quality explication and measurement. As against the goods sector where tangible cues exist to
enable consumers to evaluate product quality, quality in the service context is explicated in terms of
parameters that largely come under the domain of ‘experience’ and ‘credence’ properties and are as
such difficult to measure and evaluate (Parasuraman et al 1985; Zeithaml and Bitner, 2003).
One major contribution of Parasuraman et al (1988) was to provide a terse definition of service
quality. They defined service quality as ‘a global judgment, or attitude, relating to the superiority of the
service’, and explicated it as involving evaluations of the outcome (i.e., what the customer actually
receives from service) and process of service act (i.e., the manner in which service is delivered). In line
with the propositions put forward by Gronroos (1982) and Smith and Houston (1982), Parasuraman,
Zeithaml and Berry (1985, 1988) posited and operationalized service quality as a difference between
consumer expectations of ‘what they want’ and their perceptions of ‘what they get.’ Based on this
conceptualization and operationalization, they proposed a service quality measurement scale called
‘SERVQUAL’. The scale constitutes an important landmark in the service quality literature and has
been extensively applied in different service settings. Over a period of time, a few variants of the scale
have also been proposed. The ‘SERVPERF’ scale is one such scale that has been put forward by
Cronin and Taylor (1992) in the early nineties. Numerous studies have been undertaken to assess the
superiority of two scales, but consensus continues to elude as to which one is a better scale.
The construct of quality measured by SERVQUAL scale involves service quality (as opposed
to object quality). Perceived quality is the consumer’s judgement of overall excellence or superiority
an entity, similar to an overall attitude. Perceived quality is defined as the degree and direction of
discrepancy between a consumer’s perceptions and expectations (Parasuraman, et al. 1988). Quality is
distinguished from satisfaction in that the latter is assumed to involve specific transactions, while
expectations are viewed as desire or wants of consumers (not predicted of what will be provided).
The foundation for the SERVQUAL scale is the gap model proposed by Parasuraman, Zeithaml
and Berry (1985, 1988). With roots in disconfirmation paradigm, the gap model maintains that
satisfaction is related to the size and direction of disconfirmation of a person’s experience vis-à-vis
his/her initial expectations (Churchill and Surprenant, 1982; Parasuraman, Zeithaml and Berry, 1985;
Smith and Houston, 1982). As a gap or difference between customer ‘expectations’ and ‘perceptions,’
service quality is viewed as lying along a continuum ranging from ‘ideal quality’ to ‘totally
unacceptable quality,’ with some points along the continuum representing satisfactory quality.
Parasuraman, Zeithaml and Berry (1988) held that when perceived or experienced service is less than
expected service, it implies less than satisfactory service quality. But, when perceived service is less

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than expected service, the obvious inference is that service quality is more than satisfactory.
Parasuraman, Zeithaml and Berry (1988) posited that while a negative discrepancy between
perceptions and expectations — a ‘performance-gap’ as they call it causes dissatisfaction, a positive
discrepancy leads to consumer delight.
As the understanding of service quality has emerged, researchers have developed
conceptualizations of the dimensions of service quality. In this direction, much of the programme
research work in the management domain of services is the conceptual model of ‘SERVQUAL’
presented by Parasuraman, et al (1985: 1988). They had originally identified ten determinants of
service quality generic to the service industry. These determinants were Tangibles, Reliability,
Responsiveness, Competence, Courtesy, Credibility, Security, Access, Communication, and
Understanding the customer. Subsequent research, analysis and testing by Parasuraman et al. (1988)
have condensed these into five dimensions of service quality namely: Tangibility, Reliability,
Responsiveness, Assurance and Empathy.
The innovators, Parasuraman, Zeithaml and Berry have further developed promulgated and
promoted SERVQUAL through a series of publications (Parasuraman et al, 1985; 1988; 1990; 1991;
1994; Parasuraman 1997; Zeithaml el al.1990; 1993; 1996, Berry and Parasuraman, 1997). Limitations
with SERVQUAL are highlighted by the authors themselves (Parasuraman el a!. 1991) and in other
research studies (Babakhus and BoIler 1992; Carman 1990; Lewis 1993; Lewis and Mitchell 1990; and
Smith 1992). They relate to respondent’s difficulties with negatively worded statements; using two lists
of statements for the same items, the number of dimensions of service being assessed; ease of
consumer assessment and timing of measurement—before, during or after a service encounter. While
there is a healthy and for most part a productive debate regarding the dimensionality of SERVQUAL
across industries, and the precise wording of the SERVQUAL items, researchers generally agree that
the scale items are good predictors of overall service quality (Babakus and BoIler 1992; Bolton and
Drew 1991; Brown and Swartz 1989; Carman 1990; Cronin and Taylor 1992; Parasuraman et al.
1991). The debate underscores the importance of the subject and the significance of the contribution to
date. Such interchange will help refine the meaning of service quality.
Based on different conceptualizations, alternative scales have been proposed for service quality
measurement (Brady 2001; Cronin and Brady, 2000; Cronin and Taylor 1992, 1994; Dabholkar et al
2000; Parasuraman et al 1985, 1988), Various definitions of the term ‘service quality’ have been
proposed in the past and, based on different definitions; different scales for measuring service quality
have been put forward. Despite considerable work undertaken in the area, there is no consensus yet as
to which one of the measurement scales is robust enough for measuring and comparing service quality.
One major problem with past studies has been their preoccupation with assessing psychometric and
methodological soundness of service scales that too in the context of service industries in the
developed countries (Jain & Gupta 2004). Virtually no empirical efforts have been made to evaluate
the diagnostic ability of the scales in providing managerial insights for corrective actions in the event
of quality shortfalls. Furthermore, little work has been done to examine the applicability of these scales
to the service industries in developing countries.
Several issues have been raised with regard to use of (P-E) gap scores, i.e., disconfirmation
model. Most studies have found a poor fit between service quality as measured through Parasuraman,
Zeithaml and Berry’s (1988) scale and the overall service quality measured directly through a single-
item scale (e.g., Babakus and BoIler, 1992; Babakus and Mangold, 1989; Carman, 1990; Finn and
Lamb, 1991; Spreng and Singh, 1993). Though the use of gap scores intuitively appealing and
conceptually sensible, the ability of these scores to provide additional information beyond that already
contained in the perception component of service quality scale is under doubt (Babakus and BoIler,
1992; Iacobucci, Grayson and Ostrom, 1994). Pointing to conceptual, theoretical, and measurement
problems associated with the disconfirmation model, Teas (1993, 1994) observed that a (P-E) gap of
magnitude ‘-1’ can be produced in six ways: P=l, E.=2; P=2, E=3; P=3, E=4; P=4, E=5; P=5, E=6 and
P=6, E=7 and these tied gaps cannot be construed as implying equal perceived service quality

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shortfalls. In a similar vein, the empirical study by Peter, Churchill and Brown (1993) found difference
scores being beset with psychometric problems and, therefore, cautioned against the use of (P-E)
scores.
Validity of (P-E) measurement framework has also come under attack due to problems with the
conceptualization and measurement of expectation component of the SERVQUAL scale, while
perception (P) is definable and measurable in a straight forward manner. It is because of the vagueness
of the expectation concept, some researchers manner as the consumer’s belief about service is
experienced, expectation (E) is subject to multiple interpretations and as such has been operationalized
differently by different authors/researchers (e.g., Jain and Gupta, 2004; Babakus and Inhofe, 1991;
Brown and Swartz, 1989; Dabholkar et al., 2000; Gronroos, 1990; Teas, 1993, 1994). Initially,
Parasuraman, Zeithaml and Berry (1985, 1988) defined expectation close in the lines of Miller (1977)
as ‘desires or wants of consumers,’ i.e., what they feel a service provider should offer rather than
would offer. This conceptualization was based on the reasoning that the term ‘expectation’ has been
used differently in service quality literature than in the customer satisfaction literature where it is
defined as a prediction of future events, i.e., what customers feel a service provider would offer.
Parasuraman, Berry and Zeithaml (1990) labelled this ‘should be’ expectation as ‘normative
expectation,’ and posited it as being similar to ‘ideal expectation’ (Zeithaml and Parasuraman, 1991).
Later, realizing the problem with this interpretation, they themselves proposed a revised expectation
(E) measure, i.e., what the customer would expect from ‘excellent’ service (Parasuraman, Zeithaml and
Berry, 1994); like Babakus and Boiler (1992), Bolton and Drew (1991a), Brown, Churchill and Peter
(1993), and Carman (1990) stressed the need for developing a methodologically more precise scale.
The SERVPERF scale — developed by Cronin and Taylor (1992) — is one of the important variants
of the SERVQUAL scale. For, being based on the perception component alone, it has been
conceptually and methodologically posited as a better scale than the SERVQUAL scale which has its
origin in disconfirmation paradigm.

3. The Scale Description

Parasuraman et al, (1988) developed a 22-item instrument, called as SERVQUAL for assessing
customer perceptions of service quality in service organizations. They gave a distinction between
service quality and satisfaction by saying that perceived service quality is a global judgment, or
attitude, relating to the superiority of the service, but satisfaction is linked to a specific transaction.
Initially, the researchers took ten dimensions of service quality as the input to derive some items for the
SERVQUAL scale. The new dimensions of service quality are five in number, viz. tangibles,
reliability, responsiveness, assurance and empathy. It has now a variety of applications in banking
industry, especially in assessing customer expectations about and perceptions of service quality
delivered by different banks. It also helps in identifying the areas of managerial attention for future
improvement.
Since they have defined service quality as being a gap between customer’s expectations and
perceptions of performance on these variables, their service quality measurement scale is comprised of
a total of 44 items composed of two matched sets of 22 items (22 for expectations and 22 for
perceptions). Customers’ responses to their expectations and perceptions are obtained on a 7-point
Likert scale and are compared to arrive at (P-E) gap scores. The higher (more positive) the perception
minus expectation score, the higher is perceived to be the level of service quality. In an equation form,
the measurement of service quality can he expressed as follows:
SQi = Pi - Ei
Where:
SQi = perceived service quality of an attribute
Pi = Average perception of individual ‘ i ’ with respect to performance of a service attribute
Ei = Average expectation of individual ‘ i ’ with respect to performance of a service attribute

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 European Journal of Social Sciences – Volume 16, Number 4 (2010)

A number of other industry specific empirical studies have been conducted using SERVQUAL
Model which includes some mostly cited studies carried out in banks are Lewis (1991), Lassar et
al.(2000), Angur el al. (1999) and Blanchard et al. (1994). Therefore, SERVQUAL is chosen as an
ideal instrument for studying service quality perceptions in banks.
In view of the above mentioned facts, an analysis of service quality perceptions from
customer’s point of view may sound interesting at this juncture. Such an analysis will provide banks a
quantitative estimate of their services being perceived with intricate details such as whether banks are
meeting, exceeding or are below the perceptions of their respective customers. The present paper,
therefore, attempts to achieve the following objectives:
• Make a comparative study of service quality perceptions of banks, under study, with service
quality expectations of their respective customers;
• Know whether the banks are at, above or below the perceptions of their respective customers;
and
• Suggest, on the basis of study results, ways and means for improving service quality in banks
with a view to make overall banking service more effective arid efficient.

4. Study Design and Methodology

The data for the study were collected through a structured questionnaire from 387 customers selected
on stratified random basis. Initially 600 samples were planned covering 300 customers of both private
and public sector banks. Because of the small number of branches of private banks and their urban
concentration, unwillingness of the customers to provide data, time and budgetary constraints restricted
the sample size to 387, out of which 242 from public banks and 145 from private banks. A
questionnaire for customer survey is designed keeping the broad parameters in mind, which was pre-
tested before finalisation. The questionnaire containing all the 22 numbers of statements of
SERVQUAL instrument developed by Parsuraman et al for customer survey is administered keeping
the broad parameters in mind. The data regarding perceptions and expectations of customers were
collected in a 7 – point interval scales, where 1 stands for strongly agree and 7 stands for strongly
disagree. All the data were collected from bank customers through personal contact approach.

5. Sample Profile
The demographic backgrounds of the sample respondents in six parameters are presented in Table 1 to
understand the customer profiles i.e., age, education, gender, occupation, and income. Table describes
the customer profile and the type of banks they have chosen for their transactions. It is evident from the
table that 58.82 per cent of the young respondents transacts with public sector banks, while, 41.18 per
cent with private banks. All the respondents in different age groups have shown similar behaviour,
except 40-60 years age group; where the dominance of public sector banks (78.79 %) is visible. This
may be due to the fact that they have an account with public sector banks before the entry of private
banks into their location in mid-1990s. The χ2 value is significant at 1 per cent level of significance
indicating age-groups of the respondents and their choices of the bank are dependent on each other.
It is observed from the same table that less educated customers (81.58 %) have a choice for
public banks and the post-graduates more inclined to private banks (45.90%). This trend is observed
may be due to the large presence of public banks with wide ranges products more suitable for lower
income groups, while private banks are offering value-added services for special group of customers
(mass-banking vs. class-banking approaches). The χ2 - value is significant at 1 per cent level of
significance indicating the dependence between type of education and choice of a bank. More or less
the behaviour in gender is similar, and the χ2 value for gender variation is not significant.

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Table 1: Customer Profile by Type of Banks

Public Private Total

Parameters Chi Square
f % f % f %
Below 30 years 110 58.82 77 41.18 187 100.00
30-40 years 61 59.80 41 40.20 102 100.00
Age 12.81*
40-60 years 52 78.79 14 21.21 66 100.00
60 years and above 19 59.38 13 40.63 32 100.00
Up to HSC 31 81.58 7 18.42 38 100.00
Graduate 67 62.62 40 37.38 107 100.00
Education 13.08*
Post Graduate 66 54.10 56 45.90 122 100.00
Professional 78 65.00 42 35.00 120 100.00
Male 191 64.31 106 35.69 297 100.00
Gender 2.07
Female 51 56.67 39 43.33 90 100.00
Salaried 134 59.56 91 40.44 225 100.00
Self-employed 6 75.00 2 25.00 8 100.00
Professional 12 48.00 13 52.00 25 100.00
Occupation Business 21 87.50 3 12.50 24 100.00 23.33*
Student 42 77.78 12 22.22 54 100.00
Retired 17 56.67 13 43.33 30 100.00
Housewife 10 47.62 11 52.38 21 100.00
Less than Rs.1 lakh 97 66.90 48 33.10 145 100.00
Rs.1 – 2 lakh 92 54.12 78 45.88 170 100.00
Income Rs.2 –3 lakh 31 73.81 11 26.19 42 100.00 15.27*
Rs.3-4 lakh 16 80.00 4 20.00 20 100.00
Rs.4 lakh and above 6 60.00 4 40.00 10 100.00
242 62.53 145 37.46 387 100.00 * 1% level of
All Samples
significance

Taking into account the occupation of the customers, salaried persons dominate the sample.
The professionals and house-wives have shown more preference for private banks compared to the
other groups (52% and 52.38% respectively); while almost all the businessmen have chosen to transact
with public sector banks (87.50 %). Students and self-employed persons have a clear preference for
public sector banks. The χ2 value is significant at 1 per cent level of significance, implying that
customers with occupational variations have a preference for a bank. Similarly, for different income
groups public sector banks are more preferred. The χ2 value is significant at 1 per cent level, indicating
the influence of levels of income for choice of a bank.

6. Results and Discussion

The views of the sample respondents regarding the services offered by the banks under study are
presented in Table 2. Referring to Table 2; the comparison of customer expectations and perceptions of
public banks, it is observed that the sample customers have very similar opinion as indicated from the
mean values of different dimensions.

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Table 2: Comparison of Mean and t-Values of Expectations and Performance by Bank type

Public Private
Component Perform Expectat Gap t Value Perform Expectat Gap t Value
ance ion ance ion
Modern Looking 5.182 5.595 -0.413 -2.447** 5.274 5.568 -0.295 -1.188
Equipment
Visually Appealing 5.008 4.831 0.178 1.148 4.832 4.800 0.032 0.152
Physical Facilities
Neat Appearance of 5.095 4.926 0.169 1.124 4.947 4.747 0.200 0.876
Employees
Visually Appealing 5.095 4.570 0.525 4.164* 4.705 4.442 0.263 1.204
Materials
Tangibility 5.095 4.980 0.115 0.995 4.939 4.889 0.050 0.282
Keeping Promises 4.983 4.736 0.248 1.729 4.884 4.484 0.400 2.001**
Sincere in Solving 5.087 4.364 0.723 4.763* 5.137 4.232 0.905 4.115*
Customer Problems
Dependable 5.017 4.678 0.339 2.073** 4.768 4.589 0.179 0.808
Provide Services as 4.843 4.616 0.227 1.482 5.200 4.663 0.537 2.238**
Promised
Keeping Accurate 5.116 5.884 -0.769 -5.122* 5.274 5.853 -0.579 -2.732*
Records
Reliability 5.009 4.855 0.154 1.454 5.053 4.764 0.288 2.011**
Inform When 3.488 4.000 -0.512 -2.888* 3.516 3.768 -0.253 -1.009
Service will be
Performed
Prompt Service from 3.901 4.273 -0.372 -2.232** 3.811 4.074 -0.263 -1.210
Employees
Employees’ 4.178 4.835 -0.657 -4.093* 4.316 4.737 -0.421 -1.620
Willingness to Help
Employees’ 4.475 4.087 0.388 2.643* 4.737 4.284 0.453 2.151**
Response to
Requests
Responsiveness 4.010 4.299 -0.288 2.377** 4.095 4.216 -0.121 -0.735
Customers’ 4.186 4.860 -0.674 -4.377* 4.579 4.737 -0.158 -0.818
Confidence on
Employees
Safe Feeling of 4.388 5.545 -1.157 -7.708* 4.800 5.453 -0.653 -2.922*
Customers in
Transaction
Courteous 4.847 5.202 -0.355 -2.704* 4.874 5.042 -0.168 -0.911
Employees
Adequate Support to 5.116 5.211 -0.095 -0.734 4.989 5.021 -0.032 -0.179
Employees
Assurance 4.634 5.205 -0.570 '-5.663* 4.811 5.063 -0.253 -2.21**
Individual Attention 3.988 4.103 -0.116 -0.675 4.147 4.032 0.116 0.454
by Bank
Personal Attention 4.112 4.496 -0.384 -2.525** 3.863 4.505 -0.642 -2.687*
by Employees
Understanding 4.070 4.744 -0.674 -4.399* 4.189 4.589 -0.400 -1.784
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European Journal of Social Sciences – Volume 16, Number 4 (2010)
Specific Needs of
the Customers
Customers’ Best 3.872 4.686 -0.814 -5.443* 3.863 4.495 -0.632 -2.826*
Interests at Heart
Convenient 4.851 4.616 0.236 1.591 4.800 4.716 0.084 0.397
Operating Hours
Empathy 4.179 4.529 -0.350 3.099* 4.173 4.467 -0.295 -1.745
* 1% Level of Significance
** 5% Level of Significance

The gap (P - E) as shown in Fig. 1 and Fig. 2, is positive for first two factors (i.e. tangibility and
reliability) of public sector bank respondents indicating satisfaction of the customers. In the rest three
factors (i.e. responsiveness, assurance and empathy) the gap is negative indicating dissatisfaction of the
customers, which are also statistically significant as indicated from the t–values. Further, component-
wise analysis indicates that the higher level of dissatisfactions are observed in factors like; i) keeping
accurate and error-free records; ii) modern looking equipments, iii) bank informs when the services
will be performed, iv) promptness of employees, v) willingness of employees to help; in all
components of assurance, and empathy except convenient working hours.

Figure 1: Mean Comparisition between Expectation and Performance - Public Sector Bank

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This indicates the major reasons of dissatisfaction of customers in public banks are staff related.
There are only three components where the customer’s satisfaction is statistically significant (i.e.
visually appealing materials, sincerity in solving customer problems and the bank is dependable.
A comparison between opinion of respondents for perceptions and expectations exhibits that
out of the five dimensions of service quality gaps two are positive indicating customers satisfaction and
rest three are negative indicating customer dissatisfaction. The levels of satisfaction with private bank
are significant for reliability dimension, where as they are dissatisfied with assurance dimension

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 European Journal of Social Sciences – Volume 16, Number 4 (2010)

(significant at 5 % level). Further component-wise analysis indicates highest level of satisfaction is

associated with sincerity in solving customer problems (0.905) while highest level of dissatisfaction
with safe feeling of customers in transactions and customer’s best interests at heart.

Figure 2: Mean Comparison between Expection and Comparision - Private Sector Bank

7.0000

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The results of SERVQUAL items show similar trend in responses of customers of private and
public sector banks. The mean scores for both expectation and perception of banks are in the middle-
range indicating not very-high levels of expectations from the banks. Figure 1 and 2 present the mean
scores of expectations and perceptions of respondents of public and private banks respectively. In bank
variations, the quality gap is significant for private banks but not for the public bank is reliability
(2.011**); while for public banks but not for private banks is empathy (- 3.099*). Higher differences
for mean scores are observed for public banks, compared to that of private banks.

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European Journal of Social Sciences – Volume 16, Number 4 (2010)
Table 3: Results of Factor Analysis (Private Banks)

Expectation
Variance
Factors Variables Components Loadings
Explained
7. Dependable 0.51
10. Inform when service will be performed 0.689
11. Prompt Service from Employees 0.631
Reliability /
18. Individual Attention by Bank 0.863
Factor – 1 Responsiveness / 18.33%
19. Personal Attention by Employees 0.804
Empathy
20. Understanding Specific Needs of the
0.721
Customers
22. Convenient Operating Hours 0.621
2. Visually Appealing Physical Facilities 0.468
4. Visually Appealing Materials 0.766
Tangibility /
5. Keeping Promises 0.846
Factor – 2 Reliability / 15.81%
6. Sincere in Solving Customer Problems 0.681
Assurance
8. Provide Services as Promised 0.794
16. Courteous Employees 0.609
9. Keeping Accurate Records Responsiveness / 0.736
Factor - 3 9.69%
14. Customers’ Confidence on Employees Assurance 0.745
1. Modern Looking Equipment 0.856
Factor – 4 Tangibility 8.31%
3. Neat Appearance of Employees 0.7
12. Employees’ Willingness to Help Responsiveness / 0.621
Factor – 5 8.19%
15. Safe Feeling of Customers in Transaction Assurance 0.738
Factor – 6 13. Employees’ Response to Requests Responsiveness 0.808 7.95%
17. Adequate Support to Employees Assurance / 0.567
Factor – 7 6.83%
21. Customers’ Best Interests at Heart Empathy 0.755
Perceptions
5. Keeping Promises 0.737
6. Sincere in Solving Customer Problems 0.555
8. Provide Services as Promised 0.593
Reliability /
Factor – 1 9. Keeping Accurate Records 0.585 17.43%
Assurance
14. Customers’ Confidence on Employees 0.833
15. Safe Feeling of Customers in Transaction 0.865
16. Courteous Employees 0.718
10. Inform when service will be performed 0.715
12. Employees’ Willingness to Help 0.673
13. Employees’ Response to Requests Responsiveness / 0.522
Factor – 2 16.01%
20. Understanding Specific Needs of the Empathy
0.822
Customers
21. Customers’ Best Interests at Heart 0.766
1. Modern Looking Equipment 0.816
Factor - 3 Tangibility 12.28%
2. Visually Appealing Physical Facilities 0.773
18. Individual Attention by Bank 0.824
Factor – 4 Empathy 8.24%
19. Personal Attention by Employees 0.766
3. Neat Appearance of Employees 0.578
Factor – 5 Tangibility 7.57%
4. Visually Appealing Materials 0.875
7. Dependable Reliability / 0.774
Factor – 6 6.62%
11. Prompt Service from Employees Responsiveness 0.505
17. Adequate Support to Employees Assurance / 0.713
Factor – 7 6.17%
22. Convenient Operating Hours Empathy -0.607

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 European Journal of Social Sciences – Volume 16, Number 4 (2010)
Table 4: Results of Factor Analysis (Public Banks)

Expectation
Variables Components Loadings Variance
Factors
Explained
5. Keeping Promises 0.839
Factor – 1 6. Sincere in Solving Customer Problems Reliability 0.84 12.74%
8. Provide Services as Promised 0.704
14. Customers’ Confidence on Employees 0.486
15. Safe Feeling of Customers in 0.913
Factor – 2 Transaction Assurance 12.55%
16. Courteous Employees 0.683
17. Adequate Support to Employees 0.74
18. Individual Attention by Bank 0.857
Factor - 3 Empathy 10.07%
19. Personal Attention by Employees 0.83
20. Understanding Specific Needs of the 0.757
Customers
Factor – 4 Empathy 9.88%
21. Customers’ Best Interests at Heart 0.844
22. Convenient Operating Hours 0.633
2. Visually Appealing Physical Facilities 0.577
Factor – 5ss 3. Neat Appearance of Employees Tangibility 0.866 8.86%
4. Visually Appealing Materials 0.616
11. Prompt Service from Employees 0.589
Factor – 6 12. Employees’ Willingness to Help Responsiveness 0.699 8.69%
13. Employees’ Response to Requests 0.737
1. Modern Looking Equipment 0.501
Tangibility /
7. Dependable 0.802
Factor – 7 Reliability / 7.42%
10. Inform when service will be 0.516
Responsiveness
performed
Factor – 8 9. Keeping Accurate Records Reliability 0.9.9 6.64%
Perceptions
10. Inform when service will be 0.722
performed
11. Prompt Service from Employees 0.679
12. Employees’ Willingness to Help 0.768
13. Employees’ Response to Requests 0.629
Responsiveness /
Factor – 1 18. Individual Attention by Bank 0.622 22.08%
Empathy
19. Personal Attention by Employees 0.746
20. Understanding Specific Needs of the 0.825
Customers
21. Customers’ Best Interests at Heart 0.772
22. Convenient Operating Hours 0.681
1. Modern Looking Equipment 0.723
2. Visually Appealing Physical Facilities 0.734
3. Neat Appearance of Employees 0.807
Reliability /
Factor – 2 4. Visually Appealing Materials 0.742 18.38%
Tangibility
5. Keeping Promises 0.609
8. Provide Services as Promised 0.573
9. Keeping Accurate Records 0.625
14. Customers’ Confidence on Employees 0.774
15. Safe Feeling of Customers in 0.898
Factor - 3 Assurance 12.10%
Transaction
16. Courteous Employees 0.539
6. Sincere in Solving Customer Problems 0.459
Factor – 4 Reliability 7.45%
7. Dependable 0.826
Factor – 5 17. Adequate Support to Employees Assurance 0.696 6.56%

Principal component analysis (PCA) was used to interpret the 22 components of service quality
for expectations and perceptions to compare with the initial findings. The findings of the initial models
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were five dimensions, as compared with seven dimensions extracted for expectations and perceptions
of the respondents from private banks. The results of the factor analysis for private banks are given in
Table 3.
For customers’ expectation in private banks, the KMO measures of sampling adequacy is 0.637
and approximate Chi-Square significant at 1 % level, indicating the applicability of factor analysis.
Similarly, KMO measures 0.698 and significance level of Bartlett’s test of sphericity at 0.000, suggests
the need for factor analysis of performance of private banks as viewed by the respondents. Total
variances explained by the first seven factors are 75.106 %, and 74.321 % in the analysis of customers’
expectation and perceptions respectively. The solutions for 5 – components suggested by Zeithmal et al
are compared with the sample results indicating validity of the scales and suggesting the basis in Table
3 for private bank customers’ expectations and perception.
The KMO measures of sampling adequacy is 0.590 and χ2 is significant at 0.000 level indicates
the suitability of PCA method for identifying the important components of expectations of respondents
of public sector banks. Eight factors have been extracted by the method explaining 76.848 percent of
the variances in customers’ expectations, taking the cut off point in the eigen value as ‘1’ (see Table 4).
Similarly, the analysis of perception of respondents of public sector banks suggests five factors
extracted through PCA explain 66.582 percent variations taking the cut off point of eigen value as ‘1’.
Further, 1st and 2nd factors combined explain 40.456 % of the variations. Here, the first factor
comprised of nine out of the 22 items of service quality and second factor has clubbed seven items.
Again, the content of the five factors extracted is different from the initial dimensions suggested in the
model.

7. Conclusion
Delivering customer satisfaction is at the heart of modern marketing, which is a post-purchase
judgement of the consumers. The study on service quality in banks is measured in five dimensions by
using the SERVQUAL scale developed by Parsuraman et al (1988). The analysis of responses clearly
reveals that there exists a small perceptual difference among customers regarding overall service
quality with their respective banks. The expectations exceeding performances are clearly visible with
Indian banks. However, the results of principal component analysis indicate that though the dimensions
suggested in the model are comparable with the sample results, but the contents of the factors are
different. The respondents of both the banks mostly focus on people (staffs of the banks) factor for
improving customer satisfaction; while the banks are focusing on tangible factors such as
computerisation, ATMs, etc. to attract customers.

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