Jour of Adv Research in Dynamical & Control Systems, May 2017

Special Issue on Recent Trends in Engineering and Managerial Excellence

Determinants of Customer’s Satisfaction of

Public Sector Banks
Dr.R. Velmurugan, Associate Professor, Department of Commerce, Karpagam University, Karpagam Academy of Higher
Education, Coimbatore, Tamilnadu, India. E-mail:drvelsngm@gmail.com
Abstract--- Still, Public Sector Banks (PSBs) in India maintains the largest market share in Indian Banking System.
Most of the rural public has more faith of Government Sector Banks–Public Sector Banks–on the amount deposited.
In order to attract customers, old and new private sector banks have offered numerous innovative services. Thus,
after financial sector reforms, earning potential of public sector banks have been shared by private and foreign
banks. In order to increase their profitability and to retain their existing market share, public sector banks too have to
identify their customer’s expectations and to offer services up to the expectation of their customers. In this context,
the present study has been carried out to identify the reasons influencing customer’s satisfaction and to ascertain the
factors influencing customer’s satisfaction. The collected data have been analyzed by employing Friedman Rank
test and Multiple Regression. The result of the study disclose that most of the customers are satisfied with respect to
bank physical appearance followed by cash withdrawl limit at ATM counter, DD commission Rate. Further, Public
Sector Banks customer satisfaction depends on their Occupation, Type of Bank Account hold and Customers
Perception on Service Quality offered at PSBs.
Keywords--- Customer’s Satisfaction, Service Quality, Public Sector Banks.

I. Introduction
The financial system in India consists of various institutions which plays a pivotal role for the economic
development. The Reserve Bank of India (RBI) regulates the functioning of these institutions. It is broadly classified
as commercial banks, co-operative banks and other financial institutions. At the time of independence, the majority
of banking activities were concentrated in the metropolitan and urban centers. Banks extended advances and loans
only for trade and large firms and neglected the agriculture and other priority sectors. A need was felt for the
inclusive growth of financial sector. Hence, the Government of India nationalized a significant part of the banking
sector in 1955; the Imperial Bank of India was nationalized. The next significant milestone in banking in India took
place in 1969 and the third in 1980, when the major private banks were nationalized. Till 1991, Public Sector Banks
dominated the show. A sea change has been made after introduction of financial sector reforms.
As a result of financial sector reforms, banks started to give due importance for earning profit. Profitability of
banks depends upon effective recycling of funds and satisfying customers wants. Public sector banks are losing their
market share to private sector banks and foreign banks. Thus, Public sector banks in order to survive in the
globalised scenario must introduce numerous innovative products, as introduced by new generation private sector
and foreign banks so that they may retain existing customers and may attract new customers towards their banks.
Satisfaction is the sum of total of customer’s expressions of service quality and depends upon customer’s own
perceptions and expectations. Service satisfaction of the customer’s is an invaluable asset for banking institutions
providing unmatched competitive edge. It helps in building long term relationship as well as brand equity. The best
approach to customer retention is to deliver high level of customer satisfaction that result in strong customer loyalty.
Customer satisfaction is a very important construct in today’s market. An organization cannot survive in the long
run if its customers are not satisfied. Customer is a very important person in the market. In fact, he is the king of the
market. Therefore, it is the utmost duty of banks to safeguard his interests and meet his expectations with the
products/services offered. When a customer expects a certain level of service and he actually perceives more than
what he expected then he will be satisfied and if he perceives less than his expectation then he will be dissatisfied.
Customer satisfaction construct is more important for the survival and growth of a service industry like banks, as
offerings are intangible. The growth of these institutions depends upon their ability to create or attract new
customers and retention of satisfied customers leading to their survival in the long run. In order to be successful,
public sector banks are competing with new generation private sector and foreign banks to satisfy their customers
and thus to attract and retain loyal customers which ultimately helps public sector banks to earn higher profits in
future. Service quality satisfaction is the outcome of resources and activities expanded to offer services against the
expectations of the users from the same. Unsatisfactory customer service will lead to increase in the rate of

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Special Issue on Recent Trends in Engineering and Managerial Excellence

switching by customers. Thus, in this study an attempt has been made to identify the customers’ perception on
service quality and association between service quality and customer satisfaction of public sector banks.

II. Review of Literature

Velmurugan, R and N.Selvakumar (2016) in their study ascertains that customer’s satisfaction on private sector
banks is linked with phyiscal appearance of the bank, employee skill and employee response. Vanitha, E and
R.Velmurugan. (2015) in their study indicates that customer’s satisfaction is associated with area of residence,
gender, educational qualification, family income, duration of holding accounts and perception on service quality.
Rajeev Kumar Panda, Rama Koteswara Rao and Kondasani (2014) in their study shows that an interest rate and
safety standards in transactions results in customer satisfaction. Vinita Kaura (2013) in her study identifies that
except tangibility all the other dimensions have positive impact on customer satisfaction in public sector banks and
in case of private sector banks benefit convenience and tangibility does not have a positive impact on customer
satisfaction. Murugan (2012) in his study finds that the customers of public sector banks are more satisfied than the
customers of private sector banks as regards service quality. Vijay M. Kumbhar (2011) in his study identifies that
Customer satisfaction is associated with their educational qualification, occupation and age. Ravichandran (2010) in
his study finds that only responsiveness was found to be significant in predicting overall satisfaction with the
banking service. Lenka, Suar, and Mohapatra (2009) in a case study found that better human, technical and tangible
aspects of service quality of the bank branches increase customer satisfaction. Human aspects of service quality
found to influence customer satisfaction more than the technical and tangible aspects. Muslim Amin and Zaidi Isa
(2008) in their study identified that relationship between service quality and customer satisfaction is significant.
Jitenra Kumar and Mishra Monesh Jain (2007) in their study reveals that vigilance, competence, advancement in
services, reliability, vision, responsiveness, reach cost effectiveness and efficient process are the constituent factors
of customer satisfaction for nationalised banks, and for private banks, the factors are service quality, reliability,
competence, efficient process, customisation, ATM facility, vision, vigilance, simplicity of system and brand image.
David Cohen, Christopher Gan, Hua Hwa Au Yong and Esther Choong (2006) in their study founds that customer
satisfaction is associated with age, gender, educational level and income. Arasli et.al., (2005) in their study founds
that reliability, responsiveness-empathy and tangibles are also the explanatory variables in predicting customer
satisfaction for Greek Cypriot bank customers. Ding Hooi Ting (2004) in his study shows that service quality is the
antecedent of satisfaction, and bank-ownership moderates the relationship between service quality and satisfaction.
Kanagarathinam (2003) in her study identified that the customers are satisfied with computerized services. Ahmad
Jamal and Kamal Naser (2002) in their study indicate that both core and relational dimensions of service quality
appear to be linked to customer satisfaction and expertise is negatively related to satisfaction. Verma and Hema
(2001) in their study observe that there is a positive and significant relationship between the market orientation of
commercial banks and the customer satisfaction.

III.Statement of the Problem

Public Sector Banks acted as a monopoly till financial sector reforms are introduced in India. Thus financial
sector reforms result in establishment of more number of new generation private sector banks as well as permission
is granted for foreign banks to establish their banks in India. As a result, Indian customers are in a position to taste
the new services offered by private and foreign banks. Thus, customers of public sector banks started shifting their
account from public sector banks to private and foreign banks, where innovative services are offered. Unless, public
sector banks have not initiate necessary precautionary measures to launch new service, their sustainability in the
long run is complex. Thus, Public Sector Banks in order to retain existing customers and to attract new customer’s
public sector banks to be customer centric. Thus, in this study an earnest attempt has been made to identify the
customer’s satisfaction on public sector bank services as well factors influencing customer’s satisfaction.
Objective
To determine factors influencing customer’s satisfaction
Scope of the Study
The present study has been confined to Coimbatore district of Tamilnadu. Further, Customers perception on
service quality offered at public sector banks and factors determining customers satisfaction alone are ascertained in
the study.

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IV.Research Methodology
The study is an empirical research based on the survey method. Primary data has been collected for the study.
Primary data are collected from the customers of pubic sector banks of Coimbatore District.
Data
Data required for the study is primary in nature. Thus, primary data is collected by making use of questionnaire.
Questions pertaining to personal profile of customers, customer perception on service quality and customer
satisfaction are included in the questionnaire.
Sample Design
By adopting convenient sampling method questionnaire are distributed to 300 customers, who hold account in
Public Sector Bank of Coimbatore District.
Framework of Analysis
The collected data have been analyzed by making use of Multiple Regression and Friedman Rank Test.

V. Limitations of the Study

The study exclusively depends on primary data collected from customers of public sector banks residing in
Coimbatore district. Information as reported by customers might be prejudiced as they are likely to express biased
opinion about the service quality and satisfaction. Further, data required for the study is primary in nature.
Therefore, all sorts of limitations applicable to primary data are applicable for the present study too. Hence, utmost
care to be exercised while generalizing the result.

VI.Analysis and Interpretation

Customer Satisfaction towards Public Sector Banks-Friedman Rank Test
To identify prominent reasons that satisfy a Customer of Public Sector Banks, Friedman Rank test is employed.
Table 1: Customer Satisfaction-Public Sector Bank-Friedman Rank Test
Services Mean Rank Rank
Bank Physical Appearance 26.28 1
Location of Branch 19.05 30
Layout of Branch 20.77 13
Bank Cleanliness 20.41 15
Availability of Necessary Forms 18.35 37
Seating Facilities Provided 19.42 27
Lighting Facility 19.57 24
Parking Facility 19.52 25
Façade of Bank (Building) 20.90 11
Ventilation 17.96 39
DD Commission Rate 25.92 3
Deposit Rates 18.70 34
Interest on Loans 21.02 9
Service Charges 21.62 7
Employees Skill and Competency 23.96 6
Employee Behaviour 18.86 32
Commitment and Honesty of Employees 19.07 29
Employee Response to Customer Query 20.44 14
Consumer Grievance Redressal 19.20 28
Time taken to issue DD 18.78 33
Time taken to generate account 20.98 10
Time taken to sanction loan 24.56 5
Time taken for collection of outstation cheques 19.46 26
Time taken to resolve your problem 19.96 18
Time taken, while withdrawing money 19.67 22
ATM services 25.00 4
Credit Card 18.59 36
Mobile Banking 17.91 40
Internet Banking 20.17 17
Demat Account 20.86 12
Banc Assurance / Insurance 18.93 31
Pension Schemes 19.93 19
Cash withdrawal limit at ATM counter 26.11 2
Level of Privacy offered to Customers 18.27 38
Error Free Records 19.90 20

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Special Issue on Recent Trends in Engineering and Managerial Excellence

Services Mean Rank Rank

New Products / Schemes Offered 18.66 35
Automated Token System for Customer Queue 20.34 16
Proper Security towards Fire / Theft 19.64 23
Accuracy of Banking Records 21.60 8
Convenient Work Timing 19.70 21
From the Friedman Rank test, it is found that majority of pubic sector bank customers are satisfied with regard to
bank physical appearance followed by cash withdrawl limit at ATM counter, DD commission Rate and the like.
Determinants of Customers Satisfaction
In order to find out the variables that determine Customer Satisfaction, thirteen variables namely Area of
Residence, Age, Gender, Marital Status, Educational Qualification, Occupation, Monthly Income, Family Income,
Multiple Bank Accounts, Type of Bank Account, Frequency of Operation, Duration of Holding Account and Service
Quality have been selected Levels of significance chosen are one and five per cent level. The following regression
equation has been framed to ascertain the impact of the variables on Customer Satisfaction.
CS = a + b1 AOR + b2 AG + b3 G + b4 MS + b5 EQ + b6 OCC + b7 MI + b8 FI + b9 MBA + b10 TBA + b11 FOA
+ b12 DHA + b13 SQ + e
where,
CS = Customer Satisfaction
a = Intercept Term
b1….b16 = Regression Coefficients
AOR = Area of Residence
AG = Age
G = Gender
MS = Marital Status
EQ = Educational Qualification
OCC = Occupation
MI = Monthly Income
FI = Family Income
MBA = Multiple Bank Accounts
TBA = Type of Bank Account
FOA = Frequency of Operation
DHA = Duration of Holding Account
SQ = Service Quality
e = Error Term
Table 2: Determinants of Customer Satisfaction of Public Sector Banks-Multiple Regression Analysis
Variables Regression coefficient Standard error t
Area of Residence -0.459 1.018 -0.451
Age -0.057 0.067 -0.849
Gender 0.868 1.275 0.681
Marital Status 1.054 1.465 0.719
Educational Qualification -0.274 0.266 -1.033
Occupation -0.826** 0.296 -2.788
Monthly Income 0.000 0.000 -1.752
Family Income 0.000 0.000 0.801
Multiple Bank Accounts 1.238 1.267 0.977
Type of Bank Account -1.100* 0.518 -2.122
Frequency of Operation 0.615 0.723 0.851
Duration of Holding Account 0.396* 0.172 2.299
Service Quality 0.700** 0.042 16.659
* Significant at five per cent level ** Significant at one per cent level
Constant : 21.778
Std. Error of Estimate : 6.114
𝑅𝑅� 2 : 0.577
𝑅𝑅 2 : 0.596 **

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Special Issue on Recent Trends in Engineering and Managerial Excellence

Occupation
The regression coefficient indicates that occupation influences negative satisfaction. Agriculturists have high
level of satisfaction.
Type of Bank Account
The regression coefficient indicates that type of bank account influences negative satisfaction. Savings bank
holders have high level of satisfaction.
Duration of Holding Account
The regression coefficient indicates that duration of holding account influences positive satisfaction. The
customers, who hold bank account more than 10 years, are with high level of satisfaction.
Service Quality
The regression coefficient indicates that service quality influences positive satisfaction. The customers, who
have high level of perception on service quality, are with high level of satisfaction.
The value of R2 is found to be significant at one per cent level. This shows that the regression equation framed is
a good fit. Around 59.60 per cent of variation in level of satisfaction is due to the select variables.

VII.Suggestions
Customer Grievance Redressal Cell
Customers who have low level of perception on service quality have low level of satisfaction on public sector
banks. It is common that the customers may face some problems like delay in depositing money, delay in collection
of cheques, delay in provision of necessary information to the customer etc. As the banks depend on their customers
for their existence, they must find ways to assess the nature of the problems that may be encountered by their
customers when they carry out their dealings with the bank and take constructive steps to overcome such problems.
Hence, it is suggested that a separate Customer Grievance Redressal Cell has to be established to look after the
complaints that have been lodged by the customer and this will result in reducing the deficiency in the services
offered by the bankers to their customers. And also it is to be ensured that this cell finds effective and suitable means
for solving the complaints that have been lodged by the customers. Further, Customer Grievance Redressal cell may
also obtain the feed back from the customers on the services rendered by the bank and determining the satisfaction
derived by the customers on the services offered by the bank to them.
Rationalization of Service Charges
Agriculturists have low level of satisfaction. Service charges levied for various services extended by bank differ
from bank to bank. Hence, to increase their satisfaction level, public sector banks should rationalize their service
charges.
Provision of Need based Services
Customers who have low level of perception on service quality have low level of satisfaction. To enhance their
customer satisfaction, public sector banks may offer need based services in order to meet out the varied demands of
the customers and this will result in creating an intention in the minds of the customers that the banks offer superior
quality of services and the same will result in enhancing their satisfaction on the services offered by the banks
Increase in Number of Free ATM Usage
At present, a customer may withdraw amount from other bank ATM counters at free of cost for five times, the
number of free ATM usage limit may be raised
Training of Bank Employees
A bank's human resources play a significant role in attracting and maintaining its customers. Therefore, training
modern bank employees is essential, from staff working in the front line to marketing managers, as well as to
provide the proper working conditions and motivation in order for them to apply what they learn.
Organizing Customer Meet
Banks seeking to improve their customer base and existing customer satisfaction may organize customers meet.
Through direct interactions with customers banks can easily find the customers pulse. Hence, it is suggested that the
banks should formulate definite and concrete policies for conduct of customers meet at regular intervals and offer

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Special Issue on Recent Trends in Engineering and Managerial Excellence

them an opportunity to express their views and grievances. This will make the customers to feel that the banks give
adequate emphasis on their views and their needs. It will result in retention of existing customers and offering higher
levels of satisfaction to them on the services offered by the banks.

VIII. Conclusion
Indeed, no business concern or service sector can stay alive without the customers. As per the idealistic words of
Peppers and Rogers “The only value a company will ever create is the value that comes from customers - the ones
you have at present and the ones you will have in the nearby future”. This is utterly factual, as customer value is an
asset to the organization. Hence, with the intention of maintaining the customer, the banks require to make certain
that the right form of banking products and services are accessible at the right time for the customers. A bank that
provides customers` needs will inexorably expand the trustworthiness of their customers, which resultant in repeated
business as well as potential referrals or recommendations. As a result, it is important that bankers should constantly
to get know their customers expectations and requirements, this is possible through instituting a proficient
association with their customers empower them with the knowledge of what their customers need. When a banker
starts focusing on delivering what is of value to their customers, this will generate the potential for repeat business
too. The result of the study highlights better service quality leads to higher level of customer satisfaction. Generally,
public perceive that service quality of private sector banks is found far better than public sector banks. Hence, it is
the need of the hour for public sector banks to formulate suitable strategies to retain their existing customers and to
attract new customers by offering innovative services in accordance with private and foreign banks.

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