ISSN 2348 - 8891

Impact of Determinants involved in Retail Banking and its Users

Dr. Mangal Mishra*, Jaikishan Sahu**

Abstract
The banking industry in India has this huge picture in account, which covers the
traditional banking practices f rom the time of Britishers to the reforms period,
nationalization to privatization of banks and now increasing foreign banks in India.
Banking industry in India has achieved a new height in terms of Retail Banking. The
use of technology has brought a revolution in the working style of banks. In this paper
an attempt has been made to identify the general sentiments, challenges & opportunities
for the Indian Banking Industry. The main objective of this paper is to identify all the
main f actors that influence the customer satisfaction in banking at the present
contemporary global & highly competitive market. In this study a comparative research
design has been chosen to elucidate the determinants of customer satisfaction. The
research method will help in examining the various factors that result in Retail Banking.
Factor Analysis has been used for data analysis. Implications of this research will help
the bankers of small town banks in identifying the various factors that can affect their
customer satisfaction. Also the study will help in understanding the pros & cons of
Retail Banking in Tier II cities of India.

Key Words: Banking Industry, Customer Satisfaction, Retail Banking, Tier II Cities.

* Asst. Professor, Cloth Market Institute of Professional Studies, Indore

**Asst. Professor, Acropolis Institute of Management Studies and Research, Indore

Altius Shodh Journal of Management & Commerce

ISSN 2348 - 8891

INTRODUCTION

The banking industry has ever since transforming from the era of industrialization. Nowadays
banking industry is metamorphing into customer centric industry. The major focus of banking
industry has now become customer's satisfaction. Lot of factors like technology increment,
customer awareness and leniency in policies has led to intense competition in the world. In
India also the customers have starts expecting higher service quality from banks which, if
fulfilled could result in significantly high level of customer satisfaction.
Due to rapidly changing market, new technologies, economic uncertainties, heavy competition
and more aware customers banks are facing huge challenges to keep their customers satisfied
and retained. Many new entities domestic as well as cross border have made the process as
well as operation more vigorous & intense. Over a decade, Indian banking industry has
faced major challenges and have show massive growth. They have expanded geographically
as well as functionally. They have been meticulous in keeping customer details, requirements
& cash potentials.
They have changed a heavy course over the years. Today the banks are market driven &
market responsive. The top concern in the mind of every bank's CEO is increasing or at
least maintaining the market share in every line of business against the backdrop of heightened
competition (Shah, 2012). This makes customer satisfaction all the more important for
customer retention. Reichheld & Kenny (1990) mentioned that it call for retention of
customers for the long term, which is more economical than attracting new customers. Taylor
& Baker (1994) supported by saying that customer satisfaction is widely recognized as a
key pressure in the formation of customers future purchase intentions.
The new concept Retail Banking which has become not-so-new now is becoming larger and
hence forces to ponder upon the question that is the customer satisfied or not and what are
the essentials of retail banking which lead to the satisfaction or dissatisfaction of customers.
Previous results have emphasized that in-branch factors, in particular, staff cooperation and
attitude, branch location & convenience are the most noteworthy factors that have some
bearing on overall customer satisfaction in retail banking.

RATIONALE OF THE STUDY

The research was conducted to provide information that would help the banks in evaluating
& re-designing the market strategies to increase customer satisfaction levels. It could also
help in maintaining the existing customers as well in making new customers.

OBJECTIVES

Altius Shodh Journal of Management & Commerce

ISSN 2348 - 8891

The study was conducted by keeping the following objectives in mind:

1.

To measure customer satisfaction level in retail banking.

2.

To identify the major factors of customer satisfaction in retail banking.

SCOPE OF THE STUDY

The study is related to customer satisfaction in retail banking. The study was conducted in
Indore, MP. The study is conducted in view of retail banking in India only. Various factors
like banking services, risk & privacy, image & personality, empathy, pricing policies, charges
levied & employee behavior and customer relationship management were kept into
consideration.

LITERATURE REVIEW

Lot of studies has been done on customer satisfaction. To be more precise, if customer
satisfaction in retail banking is sufficed together, concrete data can be found. Retail banking
is a service industry focused towards the customer's money & its management. An element
that strongly drove the satisfaction of customers in the banking sector was the conviviality
factor related to the features of a bank & the attributes of its personnel (Shah, 2012). Rust
& Zahorik (1993) put forward that satisfaction with perceived product quality was the prime
driver of overall customer satisfaction.
Reichheld & Sasser (1990) stated that the customer satisfaction provided effectively can
help in customer retention. They said that the longer the customer stays with a bank more
value it generates for the bank. Customer satisfaction can also be generated through bank
image & perceived service quality which leads to customer loyalty (Bolemar & Kasper,
1995).
Johnston (1997) generalized that satisfaction or dissatisfaction with retail banking did not
arise from the same factors. To be more precise, some elements of service quality, if improved,
enhanced the customer satisfaction levels of customers, while on the other hand, other elements
may not improve satisfaction but simply function to keep dissatisfaction away. Levesque &
McDougall (1996) suggested that the determinants of satisfaction in retail banking are driven
by a number of factors and also included service quality dimension.

METHODOLOGY

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The measures used in this study are adopted from previous literature dealing with service
quality and customer satisfaction (Shah, 2012).
A total of 150 respondents were asked to give their respondents in a self administered
questionnaire. The questionnaire was based on 5 pt Likert Scale. The respondents were a
mix of various demographic factors consisting of age, gender, income & education. The
study was conducted in various retail banks of Indore city, considered to be the second
capital of MP. Factor analysis was conducted on the survey received.

DISCUSSION

Amongst the respondents 40% were females & 60% were males. The sample was mostly in
the age group of 21-30 years (68%). Maximum respondents belonged to either post graduate
level (42%) or were professionals (40%) which show the high awareness level of customers.

Factor Analysis Result

The data was factor analyzed through SPSS 19.0 and it summarized 26 variables into smaller
segments. These 26 variables were reduced to five principal components through varimax
rotation. On the basis of the analysis, five factors with eigenvalues greater than 1 were
obtained & accounted for 72.446% of the total variance.

Following factors came out from the research conducted:

i.

Banking Services: it was found that if the employees of the bank are skilled & properly
trained, the customers feel good talking to them. The competency of employees also
helps. Behavior of employees towards existing customers as well as potential customers
helps in retentions. Also, if number of employees is more it makes their efficiency more
effective. Some of the respondents also insisted on being punctual on intimated timings.
When asked for electronic medium easy usage was the main concern. Younger consumers
are adopting electronic mode more due to its "trendy effect".

ii.

Bank's Image: The image is directly related to the objectives bank the bank follows.
Also the brand image the bank portrays also leads to customer satisfaction. The better
the image of the bank the higher will be the longevity of transactions from customers.

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iii. Customer Convenience: This factor was seen to score the maximum as far as customer
satisfaction is considered. The utmost on convenience was the location of ATMs followed
by the number of branches of the bank. Some respondents also showed concern over
the location of the branch. The overall ambience of the bank also leads to satisfaction.
Some of the respondents also emphasized on better parking facilities.
iv.

Bank charges & Policies: The major reason for dissatisfaction amongst consumers is
the extra high charges the banks levy from consumers. The imposition of penalties on
consumers and recovery measures also constitutes satisfaction levels. The interest rates
offered by the banks leads to very high satisfaction levels. The charges on loans offered
by the banks also involve in the satisfaction level.

v.

Customer Relationship Management: The time the employees take to resolve the
problems, the product & services offered by the banks makes the consumers wish to
continue. The way by which the employees respond to the complaints also affects the
satisfaction level.

CONCLUSION

The study shows that the customer satisfaction level is on higher side as far as retail banking
in Indore is considered. The overall performance of the banks also plays a big role in increasing
the customer satisfaction of the banks. Moreover, the level of education completes the
increasing usage of retail banking which is usually boosted by lack of time due to busy
lifestyles. In this research, the factors used can be used for various other industries also.
Similar studies can be conducted in different cities too. This study can further guide the bank
management on improving their service quality level.

REFERENCES

1.

Bolemar JMM & Kasper JDP (1995), "The Complex Relationship between Consumer
Satisfaction & Brand Loyalty", Journal of Economic Psychology, Vol. 16, Pp. 311-329.

2.

Johnston R (1997), "Identifying the Critical Determinants of Service Quality in Retail

Banking: Importance & Effect", International Journal of Bank Marketing, Vol. 14, No.4,
Pp 111-116.

3.

Levesque T & McDougall GHC (1996), "Determinants of Customer Satisfaction in Retail

Banking", International Journal of Bank Marketing, Vol. 14, No.7, Pp 12-20.

4.

Shah A (2012), " Market Research on Factors Affecting Customer Satisfaction in Retail
Banking in Vadodara, Gujarat, Western India", Bauddhik, Vol. 3, No.1, Pp 16-32.

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ISSN 2348 - 8891

5.

Reichheld FF & Kenny D (1990), "The Hidden Advantage of Customer Retention",

Journal of Retail Banking, Vol. 7, No.4

6.

Reichheld FF & Sasser WE (1990), "Zero Defections: Quality Comes to Services",

Harward Business Review, September-October, Pp. 105-111.

7.

Rust R & Zahorik A (1993), "Customer Satisfaction, Customer Retention & Market
Share", Journal of Retailing, Vol. 69, No. 2, Pp. 193-215.

8.

Taylor SA & Baker TL (1994), "An Assessment of the Relationship between Service
Quality & Customer Satisfaction in the Formation of Consumers' Purchase Intentions",
Journal of Retailing, Vol. 58, No. 2, Pp. 163-178.

Altius Shodh Journal of Management & Commerce