BANKING BUSINESS RELATIONSHIP (BBR)
TOPIC:- RESEARCH PROJECT
BBA-BFSI 5TH SEM. “B”
Submitted to: - Submitted by: -
DR. SUNIL VERMA YASH PAL
(2017BBBF122)
PRITISH SHEEL
(2017BBBF076)
INTERRELATIONSHIP BETWEEN SERVICE QUALITY AND
CUSTOMER SATISFACTION IN COMMERCIAL BANKS.
ABSTRACT
In this modern era of global competition, factors such as customer expectation and customer
satisfaction vitally contributes towards the success of any industry and the Indian banking industry
is not an exception. It is the responsibility of banks to satisfy the customers in order to retain them
for their very survival and success. This article examines Interrelationship between service quality
and customer satisfaction in commercial banks. Data were collected from 50 valued customers of
commercial bank in Indore. In order to achieve the aims both primary and secondary source of
data were used. Primary data were collected through administrating questionnaire. The result of
this study indicated that there is significant relationship between service quality and customer
satisfaction in commercial banks.
INTRODUCTION
During the past decade or so the Indian banking sector has undergone major changes through the
effect of liberalization, globalization along with the rapid technological development.
Liberalization, Privatization and globalization (LPG) revolution has exposed the service industry
to the challenges of competition, service quality, cost and competitive environment and which has
brought about a reversal in consumer habits for banking service. The quality of service will be the
dominant primary factor in ensuring the survival of service provider in the Indian banking sector.
All over the world, service providers in the banking industry provide homogeneous and similar
products and services. In India, all the banks in the industry follow good system to maintain better
quality in service for creating satisfied customers. It will lead to customer retention and loyalty.
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toi increaseitheicustomerisatisfaction. The aim of this study is to measure the relationship between
service quality and customer satisfaction in commercial banks.
Advances in technology impact service delivery options and approaches within service
industries, leading to the active pursuit of e-retailing as a key method of service provision.
Like most service providers, banks have realized the importance of investing in technology,
to control cost, attract customers, and fulfil customers’ needs for convenience and technical
innovation. Thus, the degree of customer satisfaction and customer loyalty to a specific bank
has been a major concern for many banks. Currently, clients face long queues when they go
to banks, where they spend too much of their working time waiting for their turn . Service quality
is considered an important factor that affects customer satisfaction, which in turn is a pre-
requisite to service quality. This highlights the importance of assessing the quality of service
in order to increase customer satisfaction. It is measured that service quality using four
dimensions that is efficiency, Availability, fulfilment and privacy. Current research suggests
that customers place great importance on the value and convenience offered by banks and
that customer satisfaction (which is influenced by service quality perceptions) is a key
antecedent of consumer loyalty towards banking institutions.
Today, the increasing awareness among customers and their rights, changes the demand and high
competition in the banking sector requires constant progress in service quality from the bank to
satisfy their customers. In literature, many researchers have studied the effect of service quality
of banks on customer satisfaction. However, in India, with the heavy competition among
commercial banks to attract and retain customers, they introduce different strategies to
maximise customer satisfaction which is very important for banks’ performances. However,
dearth of empirical evidence related to the effect of service quality on customer satisfaction,
particularly customers who have bank accounts in both public and private banks, averts the outline
of new strategies to improve service quality to maximise the customer satisfaction. Therefore, the
study attempted to explore the effect of service quality on customer satisfaction of customers who
have accounts in both public and private commercial banks. The study will help to bank managers
to identify what kind of factors are highly influence to improve customer satisfaction, their
weaknesses and help to take remedial measures to improve customer satisfaction which leads
to improve the performance of banking sector.
Quality and satisfaction have been linked to customer behavioral intentions like repurchase and
loyalty intention, willingness to spread positive word of mouth, and referral. As banks provide
identical services, it is the quality of services that play a key role in the present competitive
environment. Quality of service is not only an important parameter of operational efficiency, but
has a positive relationship with customer satisfaction. Therefore, in order to meet the expectations
of the customers, and to keep pace with the changing environment, commercial banks have not
only been adopting technology and innovative strategies at a faster rate but have also been offering
numerous services and embracing many new features in their services. They have realized that
product, service characteristics, customers’ aspirations & perceptions and the availability of
competing alternatives can be used to enhance customer satisfaction. This will enable the banks to
survive in the present competitive environment. This study was intended to evaluate the impact of
service quality on customer satisfaction in banking industry. Banking sector is the driving force
for the economic growth of a country. Every commercial bank acts as a financial intermediary
whose main aim is to earn profit through borrowing and lending funds in the profitable sectors and
issuing diverse types of credit instruments. Therefore, the banking system occupies an important
place and plays significant role in a nation ‘s economy building process. Necessarily, banking
sector also ensures commendable contribution in the economic development of a country and
forms the core of the money market in an advanced country. This sort of financial intermediary
accepting deposits and granting loans; offers the widest menu of services for different business
ventures. Commercial banks have significantly expanded their financial services to the clients and
governments around the world. The current business environment is very dynamic and fast
changing. Furthermore, improving service delivery in the banking business is expected to affect
the quality of service and customer satisfaction. On the other hand, the client will use a variety of
dimensions or attributes that are important to banks to identify the quality of service through the
customer satisfaction. These service dimensions or attributes play a significant role within service
measurement, since they serve as indicators of service quality and customer’s satisfaction. As
described before, service quality was found to influence the customer satisfaction. This study
attempts to investigate the impact of service dimensions or attributes on perceive service quality
and customer satisfaction.
Hence, the present study tries to characterize the critical link between service quality, customer
satisfaction and customer loyalty in the Indian banking sector.
The Significance of the Study.
Public Sector banks were enjoying monopoly status prior to the policy of liberalization. On
implementation of Liberalization, Privatization and Globalization (LPG) during 1990’s, many new
generations of private banks and foreign banks were tied in this sector and continuously showing
their rapid growth together and contributed significantly to the economy of India. Due to this
intensive competitive situation, it became necessary for all the banks to maintain improved service
quality by providing technologically developed innovative service to satisfy customers as they
often evaluate and compare all banking services being offered in the competitive market. Any lack
in the services or in the quality may cause dissatisfaction among customers and may lead to switch
over to the competitors thereby causing a harmful condition to the organization. Admittedly, it is
very important for the Indian banks’ customers to reexamine the existing service quality by the
Indian banks and to make sure that they are able to satisfy customers and they maintain pace with
the innovative services in the future.
Service Quality, Customer Satisfaction and Loyalty Programs in Banking Sector.
Customers have special kind of behavior in different aspects like customers give priority to areas
which include the fulfillment 1 of their expectations compared to their perception mean what they
actually received. Literature suggests that in terms of quality, customers are less attracted towards
tangibles compared to reliability of the service and same applies to the banking service in India.
To achieve better level of service quality bank managers should develop working lines on which
service quality is refined to increase the customer satisfaction. SERVQUAL (service quality
model) can be used by bank managers to measure the service quality of banking sector. All the
characteristics of this model are related directly with customer satisfaction. Empathy and
Assurance are at the positive peak points while Tangibility is at the bottom level of this relation.
Current competition trends in banking sector indicate that if customer is satisfied than bank will
prosper more positively. For planning loyalty programs bankers should keep in mind the factors
and behaviors by giving positive response to consumers’ requirement on regular basis. Incentives
and rewards should be offered to customers according to their expectations rather than on basis
what is convenient to the bank. It is also imperative to determine the risks and realities of working
with partner loyalty programs. For the increase in market share customers’ involvement is an
important factor. Bank managers should work on all lines which will make their customers happy
and satisfied in the long run. Loyalty programs are important but research findings indicate that
loyalty programs alone cannot be considered as sole factors for long term retention of customers
with the bank. Banks should offer other benefits like product ranges and better communication
which should inspire the customers in positive manner. Loyalty programs alone cannot guarantee
the long run success.
RESEARCH PROBLEM
Customer satisfaction and service quality are most important elements in achieving organizational
goals. Organization tries to have constant customer satisfaction with the service provided by it. As
service quality plays a vital role in determining customer satisfaction and in the prosperity of a
bank to survive in the turbulent market, quality needs to be understood and managed throughout
the services of an organization. Satisfaction and quality have evolved along parallel tracks. In the
modern customer centric competitive arena, satisfaction and quality prove to be key factors
reciprocally interrelated in a causal, cyclical relationship. The higher the service quality, the more
satisfied are the customers. In particular, financial institutions including banks have realized the
strategic importance of customer value and continuously seeking innovative ways to enhance
customer relationships. Level of customer satisfaction is becoming one of the major targets in the
hands of banks to increase their market share. Customer satisfaction is a feeling and the impact of
that feeling differs from person to person which in turn influences customer retention and loyalty.
The present study is initiated to find out the extent of impact of service quality on customer
satisfaction
REVIEW OF LITERATURE
Considerable research has been conducted on service quality and customer satisfaction. Quality
and satisfaction has been widely discussed in various literatures since the mid 1970s. The literature
featuring service marketing mainly that of the 1990s has supported the view that improved service
quality is a means towards improving customer satisfaction and loyalty. This is also manifested in
the case of banks where the achievement of superior service quality levels has become a primary
objective towards customer satisfaction by fulfilling the needs and expectations of the customers.
In the banking industry specially, researchers like Cronin & Taylor (1992) and Taylor & Baker
(1994) as cited in Zeina (2012), regarded bank service quality as a sensitive requirement for
customer satisfaction and retention. Cronin & Taylor (1992) conducted a thorough analysis and
provided empirical support that service quality leads to customer satisfaction. Naceur et. al. (2002)
pointed out that the service quality is identified as the determinants of customer satisfaction in
banking.
Khan and Fasih (2014) indicated that service quality and all its dimensions have significant and
positive association with customer satisfaction and customer loyalty. Qadeer (2013) observed that
the quality of service has significant contribution towards customer satisfaction because it is
affected by various factors such as human interaction, physical environment, value, price,
performance, etc. Human aspects of service quality were found to influence customer satisfaction
more than the technical and tangible aspects. Shanka (2012) confirmed the theory of literatures
regarding the relationship between the service quality and customer satisfaction and indicated that
there is a positive correlation between the dimensions of service quality and customer satisfaction.
The results also showed that offering quality service have positive impact on overall customer
satisfaction. The research proved that empathy and responsiveness plays the most important role
in customer satisfaction level followed by tangibility, assurance, and reliability. The research
findings also indicated that offering high quality service increases customer satisfaction, which in
turn leads to high level of customer commitment and loyalty.
Munusamy et. al. (2010) found that Assurance has positive relationship but it has no significant
effect on customer satisfaction. Reliability has negative relationship but it has no significant effect
on customer satisfaction. Tangibles have positive relationship and have significant impact on
customer satisfaction. Empathy has positive relationship but it has no significant effect on
customer satisfaction. Responsiveness has positive relationship but no significant impact on
customer satisfaction. Santhiyavalli (2011) indicated that among five dimensions of service
quality, Reliability, Responsiveness, Empathy, and Tangibility are the major factors responsible
for customer satisfaction among the customers of State Bank of India. Sanjuq (2014) found a
positive relationship among assurance, empathy, and responsiveness, but that this relationship has
no significant effect on customer satisfaction. Reliability was found to have a negative relationship
to customer satisfaction, but no significant effecst on the same. Only tangibles were found to have
a positive relationship and a significant impact on customer satisfaction. The results show that, in
the retail banking sector, the SERVQUAL model remains an effective way of measuring customer
satisfaction. Selvakumar (2015) found that assurance has the most significant impact on customer
satisfaction towards banking services and responsiveness has the least significant impact on
customer satisfaction towards banks.
Kumbhar (2011) pointed out that there is a significant difference in the customers’ perception in
internet banking services provided by public and private sector banks; private sector banks are
providing better service quality of internet banking than the public sector banks. Shah (2014)
pointed out that in regards to e-banking services, customers of private banks are happier compared
to public banks; and suggested that banks should try in all the ways to ensure e-banking is working
24 hours; and service is available to customers hassle-free. Ongori (2013) found that there is a
significant relationship between self-service channels such as ATMs, internet banking, mobile
banking, and customer satisfaction. Firdous and Farooqi (2017) found that the internet banking
service quality dimensions have a significant impact on the customer satisfaction of internet
banking customers. Hammoud et. al. (2018), found that reliability, efficiency, and ease of use;
responsiveness and communication; and security and privacy have a significant impact on
customer satisfaction, with reliability being the dimension with the strongest impact. They opined
that e-banking has become one of the essential banking services that can, if properly implemented,
increase customer satisfaction, and give banks a competitive advantage. Knowing the relative
importance of service quality dimensions can help the banking industry focus on what satisfies
customers the most.
Rao and Lakew (2011) revealed that there is a strong dissimilarity in service quality perceptions
between customers of private sector and public sector banks. Haidar & Islam (2011) found that
tangible is the most important factor in determining the service quality of private commercial
banks followed by reliability, empathy, accessibility, and assurance. However, these factors or
dimensions vary across gender, age, education level, and occupation. Ghost & Gnanadhas (2011)
concludes that there is a close link between the customer's perception on the service quality factors
and the customer satisfaction. But the impacts of service quality factor on customer satisfaction
among the customer are not unique; it depends upon the demographic profile of the customers.
Malli (2011) concluded that each aspect of service quality leading to customer satisfaction is
influenced by one or the other demographic factors which results into varied customer satisfaction
for all categories of banks. Haq and Muhammad (2012) found that customer satisfaction varies
from person to person. Bootwala & Gokhru (2012) concluded that only income level and
occupation of the customers effect decisions; the remaining variables are not significant. The
findings of this study suggest that banks should be looking carefully at each one of the dimensions
where customers perceive receiving a different service than expected and consider the extent to
which they should work on influencing perceptions. Fozia (2013) found that different occupation
groups of customers have different perceptions toward e-banking services. The results points out
that demographic factors impact significantly internet banking behavior, specifically, occupation
and age. The paper suggests that an understanding about the customers’ perception regarding the
ebanking services will help the bankers to understand the customers’ need in a better way.
OBJECTIVE OF THE STUDY
-The objective of the study is to assess the degree of satisfaction of bank customers with respect
to service quality in commercial banks.
- To investigate relationship between consumer satisfaction and consumer loyalty.
RESEARCH METHODOLOGY
The study is based on primary data. The population of the study includes customers of different
commercial banks operating in Indore. In order to attain the objective of the study, various service
quality dimensions that are capable of influencing the satisfaction of bank customers have been
identified through extensive review of literature. A structured questionnaire was served to 50
customer for obtaining their perception on various aspects relating to service quality in commercial
banks which were considered necessary and useful for the present study. A five point rating scale
ranging from strongly disagree to strongly agree was employed. To analyse the response of bank
customers, weighted average score has been used.
Data Source: Primary data was collected through a structured questionnaire from 50
respondents of different commercial banks. Also some secondary data was collected from
various published and unpublished materials on the subject.
Sampling unit: Questionnaire collected data on customers’ demographic background
including age groups, gender, locations, income levels, families and educational
backgrounds.
Sampling method: Convenience random sampling
Type of questionnaire: Structured questionnaire with 5 point likert scale from strongly
disagree to strongly agree.
Sample Area: Indore.
HYPOTHESIS
This research is conducted to address the following hypotheses:
H1 = there is a relationship between service quality satisfaction and customer satisfaction
in banking services.
H2 = There is a relationship between service quality dimensions and customer
satisfaction in banking services.
QUESTIONNAIRE
INTERRELATIONSHIP BETWEEN
SERVICE QUALITY AND CUSTOMER
SATISFACTION IN COMMERCIAL
BANKS.
Dear Respondent,
I am Yash Pal student of School of BFSI, Symbiosis University of Applied Sciences, Indore. I
am carrying out a research on “Interrelationship between service quality & customer
satisfaction in commercial banks.” Kindly fill in the information below.
I assure you your information will be kept confidential.
NAME
Your answer
SEX
Male
Female
AGE
15-30
31-50
51 & ABOVE
EDUCATIONAL QUALIFICATION
SENIOR SECONDARY
DIPLOMA
UNDERGRADUATE
POSTGRADUATE
FREQUENCY OF USING BANK
DAILY
WEEKLY
MONTHLY
ANNUAL INCOME
0-300000
300000-500000
500000-800000
800000 & ABOVE
1. Bank employee sincerely try to solve customers problem
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
2. Bank provides the service within the time it promises to do
Strongly disagree
Disagree
Neutral
Agree
Strongly Agree
3. Employees perform services correctly at the first instance
strongly disagree
Disagree
Neutral
Agree
Strongly agree
4. ATM service of the bank is always in order
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
5. Employees are willing to help the customers
Strongly disagree
Disagree
Neutral
Agree
Strongly Agree
6. Employees assure the customers that problems will be handled
Strongly disagree
Disagree
Neutral
Agree
Strongly Agree
7. Bank's physical features are visually appealing
Strongly disagree
Disagree
Neutral
Agree
Strongly Agree
8. Bank gives you individual attention
Strongly disagree
Disagree
Neutral
Agree
Strongly Agree
9. Employees are polite in their dealings
Strongly disagree
Disagree
Neutral
Agree
Strongly Agree
10. Employees have sufficient knowledge to meet your queries
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
11. Do you feel safe about the transaction that you make with the bank
Strongly disagree
Disagree
Neutral
Agree
Strongly agree
12. Do employees understand varied needs of the customers
Strongly disagree
Disagree
Neutral
Agree
Strongly Agree
13. Does operating hours of the bank are convenient
Strongly disagree
Disagree
Neutral
Agree
Strongly Agree
14. Overall you are satisfied with you bank service
Yes
No
Thank you for your response.