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Customer Perception towards Banking Services

Submitted By: Priyank Thada

Enrolment Number: A30806414018
Course: BBA
Batch: 2014-2017




This is to certify that work entitled project “CUSTOMER PERCEPTION TOWARDS

BANKING SERVICES” is done by the PRIYANK THADA student name under my
guidance and supervision for the partial fulfilment of degree of BBA 2014-17, AMITY

To the best of my knowledge and belief the thesis:

 Embodies the work of the student itself.

 Has duly been completed.
 Fulfils the requirements of the rules and regulations relating to the summer internship
of the institute.

Dr. Nilesh Pandya

Faculty Guide

Amity Global Business School, Ahmedabad


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I Priyank Thada hereby declare that the project entitled “Dissertation” on “CUSTOMER
semester 6

To the best of my knowledge any part of this context has not been submitted earlier for any
degree diploma or certificate examination. I also declare that all the data, charts, diagram and
tables all are facts and genuine and best of my work. All data are genuine and collected by
me only and this project is not copy or theft from any other source of information.

Priyank Thada


BBA semester 6th

AGBS Ahmedabad

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I express my sincere thanks to Dr. Prashant Saxena, Dean, Amity global business school,
my project guide Dr. Nilesh Pandya, professor for guiding me right from the inception till
the successful completion of the project. I sincerely acknowledge her for extending their
valuable guidance, support for literature, critical reviews of project and the report and above
all the moral support.

Without their cooperation and support, this study would never have been possible.

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Executive Summary

Nowadays banking industry is one of the largest service sectors in India. Its main aim is to
attract the Asian market in terms of investment. The prime function of banking sector is to
provide efficient services to its customers. It consist public and private sector financial banks
whose objective is to serving people for their banking, financial and economic needs.

In India, banking industry plays a pivotal role in the economic development and form
the core of the money market in growth of country. Among all, banking sector is one of the
huge service sectors in India and strongest driver to Indian economic growth. In the present
scenario, it is running in a dynamic challenge concerning both customer base and
performance so as to provide efficient services to its customers. Banks are trying hard to win
customer satisfaction by providing better quality services. Today banks interest has shifted
from customer acquisition to their satisfaction and retention. In today’s competitive
environment, banking services plays a dominant role in customer satisfaction and service
quality has emerged as one of the important aspect.

Service quality and customer satisfaction are very foremost concepts that banking
industry must understand in order to remain competing in business. It is very crucial to know
how to measure these factors from the consumers’ prospects in order to understand their
demands and to make them satisfy. Banking Services are considered very important because
it leads to higher customer satisfaction, reduced cost, profitability, customer loyalty and

It has also been realized that the major strategy of withstanding the stiff competition
not only to retain the old customers but also to attract the new customers through provision of
better services and hence, in recent times provision of better and quality services to customers
has become one of the focal points of the service agenda of banks and it is only the quality of
the services provided that could help the banks to attract more and more of customers in a
competitive banking. However, the common bank customer now-a-days is not fully satisfied
with the services rendered by the banks alone. This is because, the human perception changes
from time to time and from individual to individual. Hence, this change in perception of a
customer of the service he gets makes the job of satisfying him at all point of time more
challenging. It is therefore, necessary to for banks to continuously assess and reassess how

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customers perceive the services, what are the new and emerging customer expectations and
how they can be satisfied on an ongoing basis.
The massive and speedy expansion and diversification of banking has not been
without its strains. The banking industry is entering a new phase in which it will be facing
increasing competition from non-banks not only in the domestic market but in the
international markets also. The operational structure of banking in India is expected to
undergo a profound change during the next decade.
A big challenge facing Indian banks is how, under the current ownership structure, to
attain operational efficiency suitable for modern financial intermediation. On the other hand,
it has been relatively easy for the public sector banks to recapitalize, given the increases in
nonperforming assets (NPAs), as their Government dominated ownership structure has
reduced the conflicts of interest that private banks would face.

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Sno. Contents Page no.
Acknowledgment iv
Executive Summary v

1. Introduction 2-19

Significance of the study 20

Scope of the study 21

Objectives of the study 21

Limitations of the study 21

2. Literature review 22
3. Research Methodology 31-32
4. Analysis 33-44
5. Findings 45
6. Suggestions 46
7. Conclusion 47
Annexure 48-49
Bibliography 50-51

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Chapter 1
The Banking Industry is considered a service oriented Industry. It renders manifold services
to the customers. Effective customer service is the centre to all business operations and also
plays an integral part in the growth strategy of the Banking Industry. A sound, progressive
and dynamic banking system is the fundamental requirement for economic development.
Hence, Commercial Banks act as the backbone of economic development. They inculcate the
habit of saving and investment. They mobilize funds from numerous small household
activities and help business firms spread over a wide geographical area. In the past, owing to
lack of information and proper guidance, the general public could not avail the full benefits
from the banking industries to improve their standard of living. It is now undeniable that the
face of the Indian consumer is changing. This is reflected in the change in the income pattern
of the urban household. The direct fallout of such a change will be the consumption patterns
and hence, the banking habits of Indians, which will now be skewed towards retail-products.
At the same time, India compares pretty poorly with the other economies of the world that are
now becoming comparable in terms of spending patterns with the opening up of our
Banks play an important role in the process of economic growth of the country by
mobilizing public savings and canalizing the flow of funds for productive processes. Today,
banking institutions face many challenges including global competition for deposits, loans,
underwriting fees, increasing customer demands, shrinking profit margins and the need to
keep up with the new technologies.
In the current Indian Banking scenario of intense competition, deregulation and the
availability of internet, the customers have a diversified array of banking and financial
products and services to choose from. Dynamic changes in the competition as well as
customer expectations have resulted in dynamic shift from one time transaction based
approach to long-term relationship oriented approach, increasing demand s of the customers
as well as the intense competition in the market place forced banks to device their strategies
accordingly to up the growing market potential. One example of such strategy that has been
adopted by banks in varying degrees is the implementation of a superior market orientation.
Market orientation draws is relevance from marketing concept that clearly indicates that to

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maintain the consistency in the succours, firms should do the need assessment of its
customers and satisfy them more effectively than their competitors in the market place.
Present scenario focuses, the environment of cut-throat competition, where private
and foreign banks are leaving no stones unturned to attract new customers and existing
customers of the banking sector to their turf, customer retention has become the key to the
survival of national and international banks. In the competitive world, awareness level of
customers is increasing day-by-day, their expectations are increasing as they have wider
choice of products and services, and the concept of generation to generation banking has also
undergone changes. Customers' loyalty is now conditioned by the quality of products and its
delivery mechanism i.e. Service. All these have necessitated the banks to provide better and
excellent customer service.
New products are added to the basket and above all, computerization and networking
is adopted for faster place and widely deployed to no longer provide substantive
differentiation on a relative basis. They have unique characteristics and they relate to other
services in a completely different way to the customers via; ATMs, Telebanking, Internet
Banking, Credit Cards and Debit Cards and so on. Banks have been offering Value-added
services in many product areas, either by way of additional attractive features or delivery
mechanisms. Many banks have introduced Credit Cards, Insurance Linked Deposit Products,
24 Hour Banking, Any Day Banking, Mobile Banking, Cash Back Offers, Core Banking, and
Anywhere Banking and So on.
The Indian banking is an essential component of the service industry. The share of
banking and insurance within the service industry is very significant. The measurement of
service quality is thus understandably high and the consistent delivery of superior service is
the strategy that is increasingly being offered as a key to service providers to position
themselves more effectively in the market place.
Service is an invisible offering which is dependent on and inseparable from the person
who extends it. Services in Indian Banks are mostly branch-based in the public sector banks,
while the foreign banks are making strides into full scale technology enabled banking.
Banking services constitute a hybrid type of offering that consists of both tangible goods
namely loan schemes, interest rate paid, kinds of accounts and the intangible services namely
behaviour and efficiency of the staff, speed of transactions, the ambience.

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Need of the Banks
Before the establishment of banks, the financial activities were handled by money lenders and
individuals. At that time the interest rates were very high. Again there were no security of
public savings and no uniformity regarding loans. So as to overcome such problems the
organized banking sector was established, which was fully regulated by the government. The
organized banking sector works within the financial system to provide loans, accept deposits
and provide other services to their customers. The following functions of the bank explain the
need of the bank and its importance:
• To provide the security to the savings of customers.
• To control the supply of money and credit
• To encourage public confidence in the working of the financial system, increase savings
speedily and efficiently.
• To avoid focus of financial powers in the hands of a few individuals and institutions.
• To set equal norms and conditions (i.e. rate of interest, period of lending etc) to all types of

History of Indian banking System

The first bank in India, called The General Bank of India was established in the year 1786.
The East India Company established The Bank of Bengal/Calcutta (1809), Bank of Bombay
(1840) and Bank of Madras (1843). The next bank was Bank of Hindustan which was
established in 1870. These three individual units (Bank of Calcutta, Bank of Bombay, and
Bank of Madras) were called as Presidency Banks. Allahabad Bank which was established in
1865 was for the first time completely run by Indians. Punjab National Bank Ltd. was set up
in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of
India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. In 1921,
all presidency banks were amalgamated to form the Imperial Bank of India which was run by
European Shareholders. After that the Reserve Bank of India was established in April 1935.
At the time of first phase the growth of banking sector was very slow. Between 1913
and 1948 there were approximately 1100 small banks in India. To streamline the functioning
and activities of commercial banks, the Government of India came up with the Banking
Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per
amending Act of 1965 (Act No.23 of 1965). Reserve Bank of India was vested with extensive
powers for the supervision of banking in India as a Central Banking Authority. After

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independence, Government has taken most important steps in regard of Indian Banking
Sector reforms. In 1955, the Imperial Bank of India was nationalized and was given the name
"State Bank of India", to act as the principal agent of RBI and to handle banking transactions
all over the country. It was established under State Bank of India Act, 1955. Seven banks
forming subsidiary of State Bank of India was nationalized in 1960. On 19th July, 1969,
major process of nationalization was carried out. At the same time 14 major Indian
commercial banks of the country were nationalized. In 1980, another six banks were
nationalized, and thus raising the number of nationalized banks to 20. Seven more banks were
nationalized with deposits over 200 Crores. Till the year 1980 approximately 80% of the
banking segment in India was under government’s ownership. On the suggestions of
Narsimhan Committee, the Banking Regulation Act was amended in 1993 and thus the gates
for the new private sector banks were opened. The following are the major steps taken by the
Government of India to Regulate Banking institutions in the country:-

1949: Enactment of Banking Regulation Act.

1955: Nationalisation of State Bank of India.
1959: Nationalization of SBI subsidiaries.
1961: Insurance cover extended to deposits.
1969: Nationalisation of 14 major Banks.
1971: Creation of credit guarantee corporation.
1975: Creation of regional rural banks.
1980: Nationalisation of seven banks with deposits over 200 Crores.

By the 1960s, the Indian banking industry has become an important tool to facilitate the
development of the Indian economy. At the same time, it has emerged as a large employer,
and a debate has ensured about the possibility to nationalise the banking industry. Indira
Gandhi, the-then Prime Minister of India expressed the intention of the Government of India
(GOI) in the annual conference of the All India Congress Meeting in a paper entitled "Stray
thoughts on Bank Nationalisation". The paper was received with positive enthusiasm.
Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalised
the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash
Narayan, a national leader of India, described the step as a "Masterstroke of political

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sagacity" Within two weeks of the issue of the ordinance, the Parliament passed the Banking
Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential
approval on 9 August, 1969.
A second step of nationalisation of 6 more commercial banks followed in 1980. The
stated reason for the nationalisation was to give the government more control of credit
delivery. With the second step of nationalisation, the GOI controlled around 91% of the
banking business in India. Later on, in the year 1993, the government merged New Bank of
India with Punjab National Bank. It was the only merger between nationalised banks and
resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until
the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth
rate of the Indian economy. The nationalised banks were credited by some; including Home
minister P. Chidambaram, to have helped the Indian economy withstand the global financial
crisis of 2007-2009.

In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalisation,
licensing a small number of private banks. These came to be known as New Generation tech-
savvy banks, and included Global Trust Bank (the first of such new generation banks to be
set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI
Bank), ICICI Bank and HDFC Bank. This move along with the rapid growth in the economy
of India revolutionized the banking sector in India which has seen rapid growth with strong
contribution from all the three sectors of banks, namely, government banks, private banks and
foreign banks. The next stage for the Indian banking has been setup with the proposed
relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks
may be given voting rights which could exceed the present cap of 10%, at present it has gone
up to 49% with some restrictions.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its
stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an
investor has been allowed to hold more than 5% in a private sector bank since the RBI
announced norms in 2005 that any stake exceeding 5% in the private sector banks would
need to be voted by them. In recent years critics have charged that the non-government
owned banks are too aggressive in their loan recovery efforts in connection with housing,

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vehicle and 25 personal loans. There are press reports that the banks' loan recovery efforts
have driven defaulting borrowers to suicide.

Government Policy on Banking Industry

Banks operating in most of the countries must contend with heavy regulations, rules enforced
by Federal and State agencies to govern their operations, service offerings, and the manner in
which they grow and expand their facilities to better serve the public. A banker works within
the financial system to provide loans, accept deposits, and provide other services to their
customers. They must do so within a climate of extensive regulation, designed primarily to
protect the public interests.

The main reasons why the banks are heavily regulated are as follows:

• To protect the safety of the public’s savings.

• To control the supply of money and credit in order to achieve a nation’s broad economic
• To ensure equal opportunity and fairness in the public’s access to credit and other vital
financial services.
• To promote public confidence in the financial system, so that savings are made speedily and
• To avoid concentrations of financial power in the hands of a few individuals and
• Provide the Government with credit, tax revenues and other services.
• To help sectors of the economy that they have special credit needs for eg. Housing, small
business and agricultural loans etc.

Regulations for Indian Banks

Currently in most jurisdictions commercial banks are regulated by government entities and
require a special bank license to operate. Usually the definition of the business of banking for
the purposes of regulation is extended to include acceptance of deposits, even if they are not
repayable to the customer's order—although money lending, by itself, is generally not
included in the definition.

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Unlike most other regulated industries, the regulator is typically also a participant in the
market, i.e. a government-owned (central) bank. Central banks also typically have a
monopoly on the business of issuing banknotes. However, in some countries this is not the
case. In UK, for example, the Financial Services Authority licenses banks, and some
commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to
those issued by the Bank of England, the UK government's central bank. Some types of
financial institutions, such as building societies and credit unions, may be partly or wholly
exempted from bank license requirements, and therefore regulated under separate rules. The
requirements for the issue of a bank license vary between jurisdictions but typically include:
• Minimum capital
• Minimum capital ratio
• 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or senior
• Approval of the bank's business plan as being sufficiently prudent and plausible.

Classification of Indian Banking Industry

Indian banking industry has been divided into two parts, organized and unorganized sectors.
The organized sector consists of Reserve Bank of India, Commercial Banks and
Co-operative Banks and Specialized Financial Institutions (IDBI, ICICI, IFC etc). The
unorganized sector, which is not homogeneous, is largely made up of money lenders and
indigenous bankers.

An outline of the Indian Banking structure may be presented as follows:-

1. Reserve banks of India.
2. Indian Scheduled Commercial Banks.
a) State Bank of India and its associate banks.
b) Twenty nationalized banks.
c) Regional rural banks.
d) Other scheduled commercial banks.
3. Foreign Banks
4. Non-scheduled banks.
5. Co-operative banks.

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Reserve Bank of India
The reserve bank of India is a central bank and was established in April 1, 1935 in
accordance with the provisions of reserve bank of India act 1934. The central office of RBI is
located at Mumbai since inception. Though originally the reserve bank of India was privately
owned, since nationalization in 1949, RBI is fully owned by the Government of India. It was
inaugurated with share capital of Rs. 5 Crores divided into shares of Rs. 100 each fully paid
up. RBI is governed by a central board (headed by a governor) appointed by the central
government of India. RBI has 22 regional offices across India. The reserve bank of India was
nationalized in the year 1949. The general superintendence and direction of the bank is
entrusted to central board of directors of 20 members, the Governor and four deputy
Governors, one Governmental official from the ministry of Finance, ten nominated directors
by the government to give representation to important elements in the economic life of the
country, and the four nominated director by the Central Government to represent the four
local boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Board
consists of five members each central government appointed for a term of four years to
represent territorial and economic interests and the interests of cooperative and indigenous
Functions of RBI as a central bank of India are explained briefly as follows:

1. Bank of Issue: The RBI formulates, implements, and monitors the monitory policy.
Its main objective is maintaining price stability and ensuring adequate flow of credit
to productive sector.

2. Regulator-Supervisor of the financial system: RBI prescribes broad parameters of

banking operations within which the country’s banking and financial system
functions. Their main objective is to maintain public confidence in the system, protect
depositor’s interest and provide cost effective banking services to the public.

3. Manager of exchange control: The manager of exchange control department

manages the foreign exchange, according to the foreign exchange management act,
1999. The manager’s main objective is to facilitate external trade and payment and
promote orderly development and maintenance of foreign exchange market in India.

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4. Issuer of currency: A person who works as an issuer, issues and exchanges or
destroys the currency and coins that are not fit for circulation. His main objective is to
give the public adequate quantity of supplies of currency notes and coins and in good

5. Developmental role: The RBI performs the wide range of promotional functions to
support national objectives such as contests, coupons maintaining good public
relations and many more.

6. Related functions: There are also some of the related functions to the above
mentioned main functions. They are such as, banker to the government, banker to
banks etc.….
• Banker to government performs merchant banking function for the central and the
state governments; also acts as their banker.
• Banker to banks maintains banking accounts to all scheduled banks.

7. Controller of Credit: RBI performs the following tasks:

• It holds the cash reserves of all the scheduled banks.
• It controls the credit operations of banks through quantitative and qualitative controls.
• It controls the banking system through the system of licensing, inspection and calling
for information.
• It acts as the lender of the last resort by providing rediscount facilities to scheduled

8. Supervisory Functions: In addition to its traditional central banking functions, the

Reserve Bank performs certain non-monetary functions of the nature of supervision of
banks and promotion of sound banking in India. The Reserve Bank Act 1934 and the
banking regulation act 1949 have given the RBI wide powers of supervision and
control over commercial and co-operative banks, relating to licensing and
establishments, branch expansion, liquidity of their assets, management and methods
of working, amalgamation, reconstruction and liquidation. The RBI is authorized to
carry out periodical inspections of the banks and to call for returns and necessary
information from them. The nationalisation of 14 major Indian scheduled banks in
July 1969 has imposed new responsibilities on the RBI for directing the growth of

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banking and credit policies towards more rapid development of the economy and
realisation of certain desired social objectives. The supervisory functions of the RBI
have helped a great deal in improving the standard of banking in India to develop on
sound lines and to improve the methods of their operation.

9. Promotional Functions: With economic growth assuming a new urgency since

independence, the range of the Reserve Bank’s functions has steadily widened. The
bank now performs a variety of developmental and promotional functions, which, at
one time, were regarded as outside the normal scope of central banking. The Reserve
bank was asked to promote banking habit, extend banking facilities to rural and semi-
urban areas, and establish and promote new specialized financing agencies.

Indian Scheduled Commercial Banks

The commercial banking structure in India consists of scheduled commercial banks, and
unscheduled banks.

Scheduled Banks
Scheduled Banks in India constitute those banks which have been included in the second
schedule of RBI act 1934. RBI in turn includes only those banks in this schedule which
satisfy the criteria laid down vide section 42(6a) of the Act. “Scheduled banks in India”
means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of
1955), a subsidiary bank as defined in the s State Bank of India (subsidiary banks) Act, 1959
(38 of 1959), a corresponding new bank constituted under section 3 of the Banking
companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other
bank being a bank included in the Second Schedule to the Reserve bank of India Act, 1934 (2
of 1934), but does not include a co-operative bank”. For the purpose of assessment of
performance of banks, the Reserve Bank of India categories those banks as public sector
banks, old private sector banks, new private sector banks and foreign banks, i.e. private
sector, public sector, and foreign banks come under the umbrella of scheduled commercial

Regional Rural Bank: The government of India set up Regional Rural Banks (RRBs) on
October 2, 1975. The banks provide credit to the weaker sections of the rural areas,
particularly the small and marginal farmers, agricultural labourers, and small entrepreneurs.

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Initially, five RRBs were set up on October 2, 1975 which was sponsored by Syndicate Bank,
State Bank of India, Punjab National Bank, United Commercial Bank and United Bank of
India. The total authorized capital was fixed at Rs. 1 Crore which has since been raised to Rs.
5 Crores. There are several concessions enjoyed by the RRBs by Reserve Bank of India such
as lower interest rates and refinancing facilities from NABARD like lower cash ratio, lower
statutory liquidity ratio, lower rate of interest on loans taken from sponsoring banks,
managerial and staff assistance from the sponsoring bank and reimbursement of the expenses
on staff training. The RRBs are under the control of NABARD. NABARD has the
responsibility of laying down the policies for the RRBs, to oversee their operations, provide
refinance facilities, to monitor their performance and to attend their problems.

Unscheduled Banks: “Unscheduled Bank in India” means a banking company as defined in

clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a
scheduled bank”.

NABARD is an apex development bank with an authorization for facilitating credit flow for
promotion and development of agriculture, small-scale industries, cottage and village
industries, handicrafts and other rural crafts. It also has the mandate to support all other allied
economic activities in rural areas, promote integrated and sustainable rural development and
secure prosperity of rural areas. In discharging its role as a facilitator for rural prosperity,
NABARD is entrusted with:
1. Providing refinance to lending institutions in rural areas
2. Bringing about or promoting institutions development and
3. Evaluating, monitoring and inspecting the client banks

Besides this fundamental role, NABARD also:

• Act as a coordinator in the operations of rural credit institutions
• To help sectors of the economy that they have special credit needs for eg. Housing, small
business and agricultural loans etc.

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Commercial Banks

Commercial Banks are banking institutions that accept deposits and grant short-term loans
and advances to their customers. In addition to giving short-term loans, commercial banks
also give medium-term and long-term loan to business enterprises. Now-a-days some of the
commercial banks are also providing housing loan on a long-term basis to individuals.

Types of Commercial banks: Commercial banks are of three types i.e., Public sector banks,
Private sector banks and foreign banks.

Public Sector Banks: These are banks where majority stake is held by the Government of
India or Reserve Bank of India. Examples of public sector banks are: State Bank of India,
Corporation Bank, Bank of Baroda and Dena Bank, etc.

Private Sectors Banks: In case of private sector banks majority of share capital of the bank
is held by private individuals. These banks are registered as companies with limited liability.
For example: The Jammu and Kashmir Bank Ltd., Bank of Rajasthan Ltd., Development
Credit Bank Ltd, Lord Krishna Bank Ltd., Bharat Overseas Bank Ltd., Global Trust Bank,
Vysya Bank, etc.

Foreign Banks: These banks are registered and have their headquarters in a foreign country
but operate their branches in our country. Some of the foreign banks operating in our country
are Hong Kong and Shanghai Banking Corporation (HSBC), Citibank, American Express
Bank, Standard & Chartered Bank, Grind lay’s Bank, etc. The number of foreign banks
operating in our country has increased since the financial sector reforms of 1991.

Functions of Commercial Banks

The functions of commercial banks are divided into two categories:
Primary functions, and
Secondary functions including agency functions.
Primary Functions
Accepting deposits
The most important activity of a commercial bank is to mobilise deposits from the public.
People who have surplus income and savings find it convenient to deposit the amounts with

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banks. Depending upon the nature of deposits, funds deposited with bank also earn interest.
Thus, deposits with the bank grow along with the interest earned. If the rate of interest is
higher, public are motivated to deposit more funds with the bank. There is also safety of
funds deposited with the bank.

Grant of loans and advances

The second important function of a commercial bank is to grant loans and advances. Such
loans and advances are given to members of the public and to the business community at a
higher rate of interest than allowed by banks on various deposit accounts.
The rate of interest charged on loans and advances variesdepending upon the purpose, period
and the mode of repayment. The difference between the rate of interest allowed on deposits
and the rate charged on the Loans is the main source of a bank’s income.

A loan is granted for a specific time period. Generally, commercial banks grant short-term
loans. But term loans, that is, loan for more than a year, may also be granted. The borrower
may withdraw the entire amount in lump sum or in instalments. However, interest is charged
on the full amount of loan. Loans are generally granted against the security of certain assets.
A loan may be repaid either in lump sum or in instalments.

An advance is a credit facility provided by the bank to its customers. It differs from loan in
the sense that loans may be granted for longer period, but advances are normally granted for a
short period of time. Further the purpose of granting advances is to meet the day to day
requirements of business. The rate of interest charged on advances varies from bank to bank.
Interest is charged only on the amount withdrawn and not on the sanctioned amount.

Secondary functions
Besides the primary functions of accepting deposits and lending money, banks perform a
number of other functions which are called secondary functions. These are as follows -
 Issuing letters of credit, traveller’s cheques, circular notes etc.
 Undertaking safe custody of valuables, important documents, andsecurities by
providing safe deposit vaults or lockers;

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 Providing customers with facilities of foreign exchange.
 Transferring money from one place to another; and from onebranch to another
branch of the bank.
 Standing guarantee on behalf of its customers, for makingpayments for purchase of
goods, machinery, vehicles etc.
 Collecting and supplying business information;
 Issuing demand drafts and pay orders; and,
 Providing reports on the credit worthiness of customers.

Development Banks
Business often requires medium and long-term capital for purchase of machinery and
equipment, for using latest technology, or for expansion and modernization. Such financial
assistance is provided by Development Banks. They also undertake other development
measures like subscribing to the shares and debentures issued by companies, in case of under
subscription of the issue by the public. Industrial Finance Corporation of India (IFCI) and
State Financial Corporations (SFCs) are examples of development banks in India.

Specialised Banks
There are some banks, which cater to the requirements and provide overall support for setting
up business in specific areas of activity. EXIM Bank, SIDBI and NABARD are examples of
such banks. They engage themselves in some specific area or activity and thus, are called
specialised banks. Let us know about them.

Export Import Bank of India (EXIM Bank): If you want to set up a business for exporting
products abroad or importing products from foreign countries for sale in our country, EXIM
bank can provide you the required support and assistance. The bank grants loans to exporters
and importers and also provides information about the international market. It gives guidance
about the opportunities for export or import, the risks involved in it and the competition to be
faced, etc.

Small Industries Development Bank of India (SIDBI): If you want to establish a small-
scale business unit or industry, loan on easy terms can be available through SIDBI. It also
finances modernisation of small-scale industrial units, use of new technology and market

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activities. The aim and focus of SIDBI is to promote, finance and develop small-scale

National Bank for Agricultural and Rural Development (NABARD): It is a central or

apex institution for financing agricultural and rural sectors. If a person is engaged in
agriculture or other activities like handloom weaving, fishing, etc. NABARD can provide
credit, both short-term and long-term, through regional rural banks. It provides financial
assistance, especially, to co-operative credit, in the field of agriculture, small-scale industries,
cottage and village industries handicrafts and allied economic activities in rural areas.

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Banking Sector and CRM

Banks and other service providers have now realize the importance of Customer Relationship
Management (CRM) and its potential to help them acquiring new customers, retain existing
ones, and maximize their life time value. Now the marketing model is changing from product
centred stage to the customer centred stage. The new data base technologies enable bankers
to get the knowledge of whom the customers are, what they bought and when they bought
and even predictions based on the historical behaviour. The foreign Banks are ahead in
offering better banking services and products, coupled with smart use of IT adoption and
have considerably achieved high operational efficiency in comparison to Public Sector and
nationalized Banks. Well-computerized foreign banks are beginning to compete seriously
with the nationalized bank and public sector banks. They aim at a profitable and wealthy part
of the market and, in contrast to the nationalized banks, do not recognize any social
responsibilities to small account holders or to a rural and semi- urban clientele. Almost 70%
of the business are still controlled by public sector Banks. Public Sector Banks are still
dominating the commercial banking system. Customers perceptions regarding services
provided by PSBs are also not satisfied.

The bank system is facing the challenges with stiff competition and advancement of
technology; the services provided by banks have become more easy and convenient. A
greater focus on customer Relationship Management (CRM) is the only way the banking
industry can protect its market share and boost growth. Over the past years, banks are highly
focusing on the CRM and are expected to provide better services to satisfy customers in all
respect. Banks are required to have a complete view of its customers across the various
systems that contain their data before implementing any CRM practices. If the bank could
track customer behaviours, executives can have a better understanding, predicting future
behaviours and customer preferences. In this way, the data and the applications will help the
bank to manage its customer relationship and continue to grow and evolve. Now, information
technology has brought about changes in the banking industry, forcing them to re-engineer
many of their basic processes and systems. Few of the technology-driven electronic banking
services being offered are viz., Automated Teller Machines (ATM) Electronic clearing
Service (ECS), Electronic Funds Transfer (EFT) tele-banking, internet banking etc. New
technological capabilities could be effectively used to create value and to better manage

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customer relationship. In IT enable practices foreign and private sector banks are more
efficient than public sectors. PSBs are needed to focus on its services, technology and
employees for better customer relations. The financial institutions seeking to adopt a
customer relationship model should consider following business requirements;
 Customer centric culture organization and infrastructure should be created.
 Maximize customer profitability and securing customer relationships.
 Efforts should be made to retain existing customers and data base to create new
 Create a database to analyse consumer’s demand, need, aspiration, preferences and
taste etc.

Service Quality
The fact that the perceived quality of the product is becoming the most important competition
factor in business world has been the reason of naming the present business era as “Quality
Era”. Consequently, service marketing intellectuals and researchers have offered several
metaphors of this issue5. For example, Berry calls it the most powerful competition weapon
and Clow (1993) calls it the organization’s life-giving blood. Quality is a multi-dimensional
phenomenon. Thus, reaching the service quality without distinguishing the important aspects
of quality is impossible. In his discussion of service quality, Gronroos (2000) refers to three
dimensions of output technical quality, service performance quality, and organization’s
mental picture. Also, Lehtinen and Lehtinen (cited in Harrison, 2000) have referred to
dimensions of physical quality, interactive quality, and organizational quality as three
dimensions of service quality. Although these attempts have had a major role in division of
service quality into process quality and output quality, but they lack enough details. On this
basis, Zeithaml et al. (1996) have referred to ten dimensions of service quality in their
primary researches. But, in their further researches, they found a strong correlation among
those dimensions. Thus, they combined these dimensions and applied the fivefold dimension
of Reliability, Responsiveness, Assurance, Empathy and Tangibles as a basis for making a
tool for testing the service quality, known as SERVQUAL. In their researches, they
emphasize that SERVQUAL is a lasting and reliable scale of service quality (Parasuraman et
al., 1994). They also said that this tool is applicable in an extensive spectrum of service
domains such as financial institutions, libraries, hotels, medical centres and…, although some
of its components should be rephrased, or more components should be added to it. Many

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researchers have tried to use this tool in different service domains Services are increasingly
becoming a larger portion of many organizations’ regionally, nationally, and globally and are
considered as a tool for revenue streams. Today’s knowledge intensive services businesses
require reliable methods of measurement, assessment, and improvement (Spohrer & Maglio,
2008). Service quality is determined by calculating the difference between two scores where
better service quality results in a smaller gap (Landrum, et al., 2008). Johnston, et al. (1997)
did comprehensive empirical experiments on service quality dimensions offered by
Parasuraman, et al. (1985 & 1988) in ten service organizations in England. At first, they
presented a list of 12 factors, and then with more researches done, they offered a list of 18
factors. In addition, many researchers have presented different models for testing the quality
of banking services, by inspiring from service quality model. Avkiran (1994) has introduced
a model consisting of four dimensions namely personnel’s contact, reliability,
communication, and access to services and seventeen components. Also, considering the
difference between Islamic banking and Usury banking in nature, Othman & Own (2001)
have offered a model called CARTER, consisting of Complaint, Assurance, Reliability,
Tangibles, Empathy, and Responsiveness which includes components.

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Significance of the Study
The core issues faced by banks today are on the fronts of customers’ service expectations,
cutting operational costs and managing competition. For these banks are exploring new
financial products and services options that would help them to grow without losing existing
customers. Only better service can help banks in meeting these objectives. Perceived service
quality determinants tend to play an important role in high skill and technology-involving
industry like banking service. Banks have traditionally placed a high value on customer
relationships with both commercial and retailing customers.
However, the nature of the customer relationship is changing particularly in the retail
side of banking. In other words, as their (i.e., banks) services become more or more “high
tech”, their technical services become standardized, reducing the importance of such services
as differentiating factors; thus customers will evaluate banks based more on their “high
touch” factors than their “high tech” factors. In view of this, delivering quality service to
customers is a must for success and survival in today’s competitive banking environment.
These service-quality issues have long been neglected in developing economies unlike the
developed economies like the USA and Europe and this also applies to the banking industry.
India being a developing economy, its banking sector with a wide geographical reach catering
to the needs of a huge clientele offers an excellent scope for research on the issue of customer
service quality in banking (as perceived by the customers), and can provide the beacon for the
evaluation of effectiveness of banking in developing economies. So, the identification of the
determinants of service quality of Commercial banks could be managerial tactical tools for
improving the banking service. In this context, the proposed study may be considered
important to examine the quality of quality of Services provided by the Banks and its level of
utilization of the bank services.

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Scope of the Study
The study will highlight the emerging trends in the growth of selecting banking services in
the competitive scenario and the major problems faced by the customers as well as the banks.
The study will also help enforcing the government and RBI in formulating and enforcing
regulatory and legal reforms in this sector and thus achieve its aim of “Customer Perception
towards banking Services”. In today’s changing demographic economic competitive factors
mean that there are fewer new customers to go around. The costs of attracting new customers
are rising. Thus, although finding new customers remains very important, the emphasis is
shifting towards retaining profitable customers and building lasting relationships with them.

Objectives of the Study

 The purpose of the study is to explore the basic dimensions of service quality offered
by Indian banking industry and its impact on individual customers by using the gap
between the customer expectations and perceptions regarding the services offered by
banking industry.
 To understand the perception of the employees of public, private, and foreign banks
and find out the challenges faced by them to deliver expected services.
 To evaluate the performance of public, private and foreign banks on the basis of
quality of services.
 To make suggestions for improvement of quality of services in public, private and
foreign banks.

Limitation of the Study

 The study is limited to the study of expectations and perceptions of customers having
an account in private, public or foreign banks.
 The perceptions and expectations of customers are limited to the time period of the
 The perceptions of the bankers are limited only to the place of study.

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Chapter 2
Review of Literature

Agathee U. S. (2012) this study show huge gap between customers’ perception and
expectation for reliability and responsiveness. This study highlights the need for bankers to
gear customer service and quality improvements efforts towards components of reliability
and responsiveness.

Ismail A., Bootwala and Gokhru A. (2012) in their study service quality issue are critically
examines from the perspectives of customers with respect to a developing economy India. In
addition, it also examined the impact of various demographic variables on selection of banks.

Ahmed K. and Chowdhury T. A. (2012) in his study found that nationalized commercial
banks and private commercial banks are almost equally reliable but services of private
commercial banks give more assurance to the customers. The study revealed that the
performance of nationalized commercial banks suffer in terms of empathy and tangibles. The
customers feel that private commercial banks are performing better than nationalized
commercial banks. So Nationalized Commercial Banks needs to take initiative for service
quality improvements.

Sathya Swaroop Debasish (2012)4 in his paper titled “Service Quality in Commercial
Banks: A Comparative Analysis of Selected Banks in Delhi” evaluated perception of service
quality to customer on basis of three dimensions; the customer-employee interaction i.e.
functional quality, the service environment i.e. environment quality, and the outcome-service
product i.e. technical quality. The study revealed that foreign banks such as Citi Bank,
HSBC, and Bank of America operating in Delhi provided better service quality, as compared
to private sector banks such as ICICI, HDFC, Karur Vysya Bank; and public sector banks
such as SBI, Corporation Bank, PNB. Citibank, ICICI Bank and SBI were perceived to
deliver better services in their respective banking sectors. The point of worry was that the
public sector banks, which accounted for over three-fourth of banking business in the country
had failed to adequately satisfy their customers.

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Koushiki Choudhary, et al. (2012) in their paper titled “Relationship Marketing Strategies
and Customer Perceived Service Quality: A Study of Indian Banks” stated that one of the
determinants of the success of the relationship marketing strategies is how the customers
perceive service quality. In India, with the onset of financial deregulation, banks are
functioning increasingly under competitive pressure and it is imperative for banks to focus on
developing long-lasting relationship with their customers. The study explores what kind of
relationship and strategies is to be followed by the Indian banks in today’s competitive
environment and the service quality perceived by the customers.

Debashis and Mishra (2014)-The study analysed and measured customer satisfaction in
branch services provided by nationalized banks in northern India . 1200 customers were
given questionnaires and it was found out that computerization, accuracy in transactions,
attitude of staff and availability of staff influenced customer satisfaction. Least important
factor was promotion of the products and various schemes.

Joshua A J, V Moli, P. Koshi (2014) -The study evaluated and compared service quality in
old and new banks using sample size of 480. The study found out that customers were
satisfied in reliability, empathy and price and for other parameters the difference between
expectations and perceptions were smaller than public sector banks

Mohammad et al(2014)- The study tries to develop a comprehensive model of banking

automated service quality taking into consideration unique attributes of each delivery channel
and other dimensions which influence service quality

Raul and Ahmed (2014)-The study investigated customer service in public sector banks in 3
districts in Assam and it was found that customers were dissatisfied with the management,
technology and interactive factors along with high service charges. Communication gap was
the root cause of poor service and service was different in rural and urban sectors

Sharma and Sharma (2014)-The study analysed customer delight in urban consumer
banking. The study found out that customers were satisfied with loan facilities, bank
environment, routine work procedures, location, interest rates etc and were dissatisfied with
loan formalities and promotion through media.

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Dash et al(2014)- The study measured customer satisfaction through 5 service quality
dimensions in Noida and Ghaziabad and findings revealed that assurance was the most
important dimension of service quality followed by reliability and responsiveness. Tangibles
was found to be least important

Sharma S, et al (2014)-The study did a comparison of public and private banks with respect
to perceptions of customers regarding service quality. It was found out that service quality is
associated with satisfaction and there was significant difference between quality of services
provided by banks. Banks in smaller cities are far behind big cities in this regard

Dr.Vannirajan&B.Anbazagan(2014)- The study tries to make an assessment of

SERVPERF scale in the Indian Retail banking sector by doing a survey in banks at Madurai.
The study found that in public sector banks tangibles and assurance are most important and in
private sector banks reliability, responsiveness and tangibles are most important.

P K Gupta (2014)-Objective of this study was to find out the behaviour of customers with
respect to internet banking vis-à-vis conventional banking. The study found out that internet
banking was found to be easier and speedier than conventional banking and trust, accuracy
and confidentiality were the most important factors here.

Ellaine Wallce&Leslie De Cheratatony (2012)-Study finds out the importance of,

assurance and reliability, customer orientation teamwork etc. in performance of . Also the
study highlights criticality of branch& employee teamwork for performance. Continuous
commitment and service recovery were also found important

Mohammed Siddique Khan, Siba Shankar Mahapatra (2014)-The study was to identify
important parameters affecting service quality in internet banking. Factor analysis of the data
collected finds 7 factors which included factors like reliability, access, user friendliness
privacy etc. Correlation analysis shows that a significant positive correlation exists between
factors. Also it was found out that business class differs from other classes in perception

Padhy P K and B N Swar(2013)- the paper investigated role of technology in banking and
its impact on perceived service quality in public, private and foreign banks in Orissa using a s
ample size of 300 customers. Foreign bank was found to be very close to expectations of

Page | 24
customers followed by ICICI and AXIS. Service quality in public sector banks was found to
be very low

Sandip Khosh Hazra, Dr.Kailash Srivatava (2014)-The study was done to find out the
association between service quality, customer satisfaction, loyalty and commitment.
SERVQUAL is used and the study finds out that in private banks dimensions of service
quality, assurance and reliability are significant for satisfaction of customers, loyalty and
commitment. The banks taken differed in these parameters

Monica Bedi(2013)-The study investigates relationship between service quality, customer

satisfaction and behavioral intentions. The findings also indicated the importance of service
quality. The study also found out that banks differed in the service quality parameters.

Fulbag Singh, Davinder Kaur(2013)- The study combines all literature review done in
service quality And related areas in banking till 2010. It contains the works of Cronin&
Taylor, Bahia and Nantel and others on this area

Dr Ravichandran et al (2014)- The paper analyses existing study and tries to understand
socio demographic and rational profile of public retail banking consumers. It also finds out
the importance of service quality dimensions to predict the multidimensional model of
behavioral intentions among public sector consumers in India. Loyalty was found to be
influenced by operating hours, modern equipments, error free records etc. Service quality
parameters like tangibility, responsiveness and empathy dimensions were also found to be
very important.

Sachin Mittal&Rajnish Jain (2014)-This paper is basically a literature review of banking

industry and effect of IT based services on customer satisfaction. The study highlights
customer satisfaction levels among young customers in banking industry. A survey indicates
the gaps between customer’s expectations and perception with respect to IT based banking
services. Findings indicated need to improve the IT based services for enhancing customer

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Kumbhar, Vijay (2011) - It examined the relationship between the demographics and
customers’ satisfaction in internet banking, It also found out relationship between service
quality and customers’ satisfaction as well as satisfaction in internet banking service provided
by the public sector bank and private sector banks. The study found out that overall
satisfaction of employees, businessmen and professionals are higher in internet banking
service. Also it was found that there is significant difference in the customers’ perception in
internet banking services provided by the public and privates sector banks.

Kailash M (2012) - The paper compares public and private sector banks in Vijayawada city
using SERVQUAL model. The findings revealed that private sector banks have good services
to customers and they retained customers by providing better facilities. The study finds out
importance of new products and services for banks for retaining customers.

Deepak Sirdeshmukh, et al. (2002) have developed a framework for understanding the
behaviour and practices of service providers that creates customer trust and mechanisms that
convert such trust into value and loyalty in relational exchanges. The findings of the study
reveal that conversion of trust to loyalty involves complex, multiple-loop process that require
an understanding of how specific trust worthiness dimensions canbuild greater customer trust,
how increased customer trust can enhance value for the customers and how value translates
into loyalty. Although there are significant pay offs from building customer trust in relational
exchanges, realizing them is neither straightforward nor inevitable.

Suresh Chander, et al. (2003) studied the critical factors of customer perceived service
quality in banks of a developing economy, India and also compared and contrasted the three
groups of banks in India with respect to the service quality factors from the perspective of the
customers. The findings of the study reveal that there seems to be a great amount of variation
with respect to the level of service quality offered by the three groups of banks. Customers in
developing economies seem to keep the “technological factors” of services such as core
service and systematization of the service delivery as the yardstick in differentiating good/bad
service while the “human factors” seem to play a lesser role in discriminating the three
groups of banks. The service quality indices with respect to the three groups and the Indian
banking industry as whole, offer interesting information on the level of service quality
delivered by banks in India.

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Upinder Dhar, Santhosh Dhar and Abhinav Jain (2004) studied different service quality
factors of the private and public sector commercial banks. They have selected 150
respondents and used correlation, factor analysis and Z-test. The findings of the study
revealed that competence, tangibility and record maintenance seem to be the typical factors of
private sector commercial banks, because these three factors have been found to be common
in terms of the perception of employees and customers of private sector commercial banks.
Similarly, tangibility, reliability and access seem to be the typical factors of public sector
commercial banks, because these factors are found to be common in terms of the perception
of employees and customers of public sector commercial banks.

Mukherjee Avinandan and Nath Prithwiraj (2005) made an attempt to propose and
empirically assess three comparative approaches to measuring service quality namely
modified gap model, TOPSIS and loss function. The empirical evidence is provided by large
sample customer data on the service quality for leading Indian commercial banks. The service
quality evaluations obtained from these three distinct methods are compared and tested for
their mutual agreement. The findings of the study showed that the rankings obtained from
different methods are statistically in agreement, suggesting that the alternative approaches
can provide equally good measurement of service quality. The findings of the study revealed
that a single measure of overall service quality based on gap model is over simplistic. It
would be more useful to explore a richer profile of customer service quality provided by
different measurement approaches. The study offers managers with a framework of service
quality improvement that measures service quality gaps, selects an optimal combination of
attribute levels to deliver customer satisfaction, and focuses on reducing the future loss
caused by poor quality.

Choudhury Koushiki (2007) made an attempt to explore the dimensions of customer

perceived service quality in the context of the Indian retail banking industry. Drawn from
customers‟ perceptions about service quality as well as the bank marketing and service
quality literature, a set of service quality parameters was devised. Using factor analysis, these
parameters have been employed in the context of four of the largest banks in India to
distinguish the underlying dimensions of service quality. The results of the study revealed
that customers distinguish four dimensions of service quality in the case of the retail banking
industry in India namely, attitude, competence, tangibles and convenience.

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Ashutosh K. Singh and Shiv K. Tripathi (2007) carried out a research to describe the
responses of the customers and banking executives of the private sector banks on the basis of
a scheduled questionnaire. A sample of 3 private sector banks was selected in two major
cities Lucknow and Delhi. The banks covered were ICICI, IDBI and Centurion Bank of
Punjab. Out of the banks selected, overall 10 responses each of the customers and executives
for each bank have been collected. Thus, the sample comprises responses of 30 customers
and 30 executives of private sector banks. The questionnaire was administered to the
customers who were present at the banks counters and similarly the responses of the
executives were collected from the same banks. The analysis reveals that the difference
between the customers‟ expectations and management perception of customers‟ expectations
exists on quality parameters like responsiveness, competence, product range and security.
The study provides an insight into the perception pattern of customers and executives of
private sector banks and may be further extended to determine the causes of these existing
gaps with larger sample size.

Mamta Brahmbhatt and Dharmendra Panelia (2008) made an attempt to comparatively

examine and measure the service quality and customer satisfaction among private sector,
public sector and foreign banks and to offer suggestion based on results of the study. A
stratified simplerandom sampling procedure was used on a sample of 246 respondents. The
sample of 246 was divided equally among three types of banks i.e. 82 respondents for each
strata. The population of this study was customers of retail banks of Ahmedabad and
Gandhinagar. The primary data were collected with the help of questionnaire. Factor analysis
and reliability testing were employed to identify service quality attributes. The findings of the
study showed that service quality is at the root of customer satisfaction. The results of this
study provide evidence that the SERVQUAL dimensions are a useful tool to predict overall
satisfaction. The study suggested that banks need to improve those employee-related
attributes of service quality since they are the main sources of the competitive advantage.

Ravichandran (2010) conducted a study to examine the influence of perceived service

quality on customer satisfaction. Two private banks in Tiruchirappalli District were selected.
A total of 350 questionnaires were distributed and 300 were returned. The primary data were
collected with the help of structured questionnaire. The findings of the study showed that
only responsiveness was found to be significant in predicting overall satisfaction with the
banking service. The study affirmed that service quality in the private banks was at adequate

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level and the regression on overall service quality lists out the various SERVQUAL items
which has a spread in all the dimensions of the SERVQUAL model.

Arun Kumar, et al. (2010), endeavoured to fill the gap in the service quality which
determines customer satisfaction and attitudinal loyalty literature by exploring the dimensions
of customer perceived service quality in the context of Indian retail banking industry. A set of
variables are drawn from customers‟ perceptions about service quality. These parameters
have been used in the context of two of the largest private banks dealing with retailing
banking namely, ICICI Bank and HDFC Bank to identify the underlying dimensions of
service quality which determine customer satisfaction and attitudinal loyalty. The study
suggested that in order to gain and sustain the competitive advantages in the fast changing
retail banking industry in India, it is crucial for private banks to understand what customers
perceive to be the key dimensions of service quality and what impacts the identified
dimensions have on customers‟ attitudinal loyalty. They also suggested that these issues
should be a central concern for retail bankers as well as service management academicians
and practitioners to explore the specific component and to train their employees in those areas
and to delight the customers in the needed domain to enhance service quality and build
attitudinal loyalty to retain the valued customers who are the most profitable customers for
the banks.

Ravichandran, Tamilmani and Arun Kumar (2010) made an attempt to identify the key
dimensions of perceived service quality as well as to investigate prevailing service quality
level in the private retail banking consumers and to find out a regressive equation on the five
dimensions of service quality with that of the overall service quality. Primary data were
collected for the research with the help of an undisguised structured questionnaire. The
sample size used was 300 respondents. Two top private banks in Tiruchirappalli district were
selected. The findings showed that only responsiveness was found to be significant in
predicting overall satisfaction with the banking service. The study suggests that recognizing
responsiveness as another form of responsibility is essential to every member of the health
care system in order to increase customers‟ overall satisfaction with banking service. The
study affirms that the service quality level in the private banks was at adequate level and the
regression on overall service quality lists out the various SERVQUAL items which have a
spread in all the dimensions of the SERVQUAL model.

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Vijay M. Kumbhar (2011) carried out a research to observe major users group of internet
banking services; to examine the relationship between service quality and their satisfaction in
internet banking; to examine the relationship between customers‟ demographics and their
satisfaction in internet banking; and to examine the customers‟ satisfaction in internet
banking service provided by public and private sector banks. The primary data were collected
from 190 customers by customer survey of public sector banks namely, SBI, Bank of Baroda,
Corporation Bank, and IDBI Bank, and private sector banks Axis Bank and HDFC Bank in
Satara city, Maharashtra. Stratified judgmental sampling was adopted and data were collected
during the period July 2010 to October 2010. Overall results show that highly educated are
using this service, however, remaining customers are not using this service. Thus, the study
suggests that there is a need to simplify the internet banking services and encourage lower
literate people as well other people to use internet banking services. The results of the study
show that private sector banks are providing better service quality of internet banking than
service provided by the public sector banks. The study suggests that public sector banks
should improve their internet banking services according to the expectations of their

Dharmalingam and Kannan (2011) made an attempt to evaluate the quality of service in
selected new private sector banks in Erode district; to identify the gap between customer
expectation and perception; and to identify the areas that need to be improved by banks to
deliver superior quality of service. The data were collected from 240 customers of selected
private sector banks in Erode district with the help of questionnaire. This isan analytical study
based mainly on the primary data collected through a scientifically developed questionnaire.
The data were collected from three private banks, i.e. ICICI Bank, Axis Bank and HDFC
Bank. The gap analysis shows that product variety is having a gap between customer
expectation and perceptions of service quality. The study suggests that banks have to
understand the changing needs of customers, their aspirations and expectations to create
value. Banks should have a strong customer relationship management system that would
indicate the worth of the customer and able to understand his needs.

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Chapter 3
Research Methodology

Research is a logical and systematic search for new and useful information on a
particular topic. It is an interrogation of findings solutions to scientific and social problems
through objective and systematic analysis. It is a search for knowledge, that is, a discovery of
hidden truths. Here knowledge means information about matters. The information might be
collected from different sources like experience, human beings, books, journals, nature etc. A
research can lead to new contributions to the existing knowledge only through research it is
possible to make progress in a field. It is done with the help of study, experiments,
observation, analysis, comparison and reasoning.
In this chapter the research design and methodology have been outlined. The research
design emphasizes the merits in quantitative research for as data collection in concerned,
recording procedures and the instrument of research is concerned. Qualitative research
approach has been adopted to carry out this study, particularly the survey design. The reason
for the adoption of this approach is to find out cause and effect relationship. To make a
generalization from a sample of population is an efficient way of collecting information from
a large number of respondents. Statistical techniques can be used to determine validity,
reliability and statistical significance because they are standardized. They are relatively free
from several types of errors. They are relatively easy to administer and there is an economy
in data collection due to the focus provided by standardized questions.
Objectives of the Study
 The purpose of the study is to explore the basic dimensions of service quality offered
by Indian banking industry and its impact on individual customers by using the gap
between the customer expectations and perceptions regarding the services offered by
banking industry.
 To understand the perception of the employees of public, private, and foreign banks
and find out the challenges faced by them to deliver expected services.
 To evaluate the performance of public, private and foreign banks on the basis of
quality of services.

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 To make suggestions for improvement of quality of services in public, private and
foreign banks.

Limitation of the Study

 The study is limited to the study of expectations and perceptions of customers having
an account in private, public or foreign banks.
 The perceptions and expectations of customers are limited to the time period of the
 The perceptions of the bankers are limited only to the place of study.

Sample Size: Sample size of this research is 150 respondents.

Sampling Procedure: This research follows non-probability sampling method in the

selection of sample as per the convenience.

Primary Data: To achieve the objective, data has been collected to know about the
perceptions of customers related to services offered by Banks through questionnaire which is
based on service quality dimensions.

This study has been conducted on the individual customers of various banks In India. To
evaluate the dimensions of service quality, no. of statements were chosen from the structured
service quality questionnaire and then modified to make it specific and best suitable for
customers of banking sector. After conducting the survey, questionnaires were collected for
tabulation and analysis. The test of significance has been applied on the basis of the
comparison of mean values of expectation and perception.

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Chapter 4

Analysis is a “process of organizing and synthesizing data in such a way that research
questions can be answered and hypothesis tested”. The term analysis refers to the
computation of certain resources along with searching for patterns of relationship that
exists among data groups.

In this chapter, the data collected were systemically processed, tabulated and made
suitable for analysis and interpretations. It was a study on customer perception
towards Banking sectors-a study with reference to public sector and private sector
banks through data collected by questionnaire. The results obtained were classified,
tabulated and the following analyses were performed in fulfilling the objectives of the
Q1. Gender

On the basis of sample size taken by me for the analysis i.e. 150 among them 64.7% are male
respondents and rest 35.3% are female respondents. Still female using less banking facilities
as compared to male.

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Q2. Age

Among the sample size taken by me for the analysis 7.3% are of 50 and above age, 24.7% are
of 40-50 age, 31.3% are of 30-40 age and below maximum 36.7% belong to more below 30

Q3. Occupation

Among the 150 respondents of me research 24.7% respondents are businessman, 24%
respondents are salaried, 23.3% respondents are professional, 22% respondents are housewife
and 6% respondents are other which is mostly students.

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Q4. You are the costumer of which bank

Among the 150 respondents of my research 18% of them are having account in State bank of
India, 22.7% of them are having a bank account in Bank of Baroda, 23.3% of them are
having a account in axis bank, 22% of them are having a account in ICICI bank, 21.3% of
them are having a account in HDFC Bank, 20.7% of them are having a account in Punjab
National Bank and 8.7% of them having an account in other banks like IDBI, kotak Mahindra
bank, Union bank etc. this is also indicating that customers prefer private sector banks more
than public sector banks.

Q5. Which products/services you are taking from bank

Among the 150 respondents of my research 68% of them are using savings accounts service
of their respective banks whereas 36.7% are using current account facility, 29.3% of them
having fixed deposits in their respective banks and 24% of them having loans in their
respective banks. Some respondents are using both saving account facility and current
account facility whereas some of them are using both fixed deposits and loan facility.

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Q6. Which environmental forces influence you the most to select your bank

Among the 150 respondents of my research the major reason of choosing their respective
bank is nearness so that customer can easily access their bank account the other reasons are
reputation of banks 42%, suggestion from friends of family members are 9.3% or influence
from TV commercials are 30.7%.

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Section 2
In this section respondents have to rate their respective banks on given
5 for highly satisfied
4 for Satisfied
3 for Moderate satisfied
2 for Dissatisfied
1 for Highly Dissatisfied

Q1. Timeliness of service delivery

In this section respondents have to give rate according to the attribute given. Among the 150
respondents 48.7% respondents are satisfied with their banks related to timeliness of service
delivery whereas 46% are highly satisfied with their banks.

Q2. Sharing of status while work in progress

Among the 150 respondents only 13.3% respondents are highly satisfied with the their banks
in terms of this attributes as there are only some private banks who used to share the status of

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work while work in progress, whereas 40.7 respondents are moderate satisfied with the

Q3. Quality and Sophistication of delivery

Among the 150 respondents only 14.7% respondents are highly satisfied with their respective
banks in terms of this attribute whereas 36% are satisfied with the banks and 32.7% are
moderate satisfied with their banks.

Q4. Behaviour and mannerism of delivery staff

Staff behaviour and mannerism is consider as important aspect and it can affect the service
quality of bank so among the 150 respondents 40% of respondents are satisfied with their
respective banks in terms of this attribute whereas 33.3% are moderate satisfied with their
respective banks.

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Q5. Level of congruence between time taken to deliver the service and stipulated time

This attribute is also consider as important aspect as it depicts in how much time banks
complete the work as compared to stipulated time they provide. So among the 150
respondents 24.7% are highly satisfied with their respective banks in terms of this attribute
whereas 38.7% respondents are satisfied with their respective banks in terms of this

Q6. Level of service quality

Among the 150 respondents 20.7% respondents are highly satisfied with the service quality
of their respective banks whereas 36% respondents are moderate satisfied with the service
quality of their respective banks.

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Q7. Level of need fulfilment expected

This attribute depicts whether the customers need fulfilment is complete as they are expecting
from banks. So among 150 respondents 37.3% of them are satisfied with their respective
banks in terms of this attributes whereas only 14% of them are highly satisfied with their

Q8. Frequency of quality of service

Among the 150 respondents only 18% of them are highly satisfied with the quality of service
of their respective banks whereas 30% of them are satisfied with their respective banks.

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Q9. Knowledge of company products and customer opportunity

This attribute can be considered as important as staff must have knowledge of company
products and customer opportunity so that they can give advice to customer related to that. So
among 150 respondents 36% of them are satisfied with their respective banks in terms of this
attribute whereas 16% of them are highly satisfied with their respective banks.

Q10. Conduct and communication of relationship person

Communication of relationship person is also an important attribute so among 150

respondents 17.3% are highly satisfied with their respective banks in terms of this attribute
whereas 32.7% are satisfied with their respective bank.

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Q11. Timeliness of complaint resolution

This attribute depicts timeliness of complaint resolution which means in whether the bank
resolve customers problem in given time or not. So among 150 respondents 18.2% are highly
satisfied with their banks in terms of this attribute whereas 33.1% are satisfied with their

Q12. Quality of complaint resolution

This attribute depicts the quality of complaint resolution so among 150 respondent’s only
14% respondents of them are highly satisfied with their respective banks whereas 36% of
them are satisfied with their respective banks.

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Q13. Level of iteration till the complaint was resolve

Among the 150 respondents 18% of them are highly satisfied with their respective banks in
terms of this attribute whereas 32% of them are satisfied with their respective banks.

Q14. Knowledge and empathy of the customer service staff

This attribute is considered as important attribute knowledge can be considered as main

factor for the overall quality of bank. So among 150 respondents 18.7% respondents are
highly satisfied with their respective banks in terms of this attribute whereas 36% of them are
satisfied with their respective banks.

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Q15. Overall Satisfaction

In overall satisfaction of banks in terms of above given attributes we can see variations as
only 18.7% are highly satisfied, 38% of them are satisfied, 32% of them are moderate
satisfied, 8% are dissatisfied and 3.3% are highly dissatisfied.

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Chapter 5
Findings and Suggestions
 From the study it has been observed that out of 150 respondents 64.7% are males and
35.3% are female’s respondents.

 It has also been observed that customers are aware about the services provided by
banks and customers need more improvement in some attributes.

 It has been observed that among the 150 respondents 48% of them chose their bank as
the bank is near to their home or workplace.

 It has been observed that among 150 respondents 68% of them use savings account
facility in their respective banks.

 It has also been observed that among 150 respondents 92 customers is using public
sector banks and rest of them are using private sector banks.


 All the public, private, and cooperative banks need to improve upon their reliability
&Assurance dimensions of service quality. For that it would be better for all the banks
to be very transparent in their operations, speedy & clear in their process &
communication respectively & assured about unique and advantageous products and

 The customers of banking industries preferred and except transparency with the
employees. So, customer interaction programmes must be essential to study the
characteristic features of the customers

Page | 45
 Information search place a major role in consolidating optimistic relationship between
customers and employees. So, meticulous care must be taken by the bank to advertise
their services.

 The customers are advised to the about mutual benefit. This enables the banks to
improve the quality of services. The qualitative approach and proportionate should be
taken care for their customers.

 Since the employees are enthusiastic in initial strategies to acquire the customers the
banks may adopt certain incentives strategies for the customers to encourage them.
This move would pave the way to maintain smooth relationship between employees
and customers.

 The employees of these banking sectors should conduct a survey to measure the
customer preference and level of satisfaction.

 The banks arranged employees training programmes must be periodically conducted

to give effective responsibility to the employees

Page | 46
Chapter 6

CRM is a powerful concept for the success of any industry. It paves the way to maintain an
optimistic relationship with customers to increase the business and profitability. The
strategies employed CRM is aimed at mutual benefit to the customers and industries. It
creates deep and wide impact on customers and make in deep in roads in identifying the
lucrative move of the industries. Personal details of customers like gender, age, education
qualification are essential in determine in essential to perform better for all the industries in
fact it gives maximum credit and gains to the industry for the future.

This study provides a step in understanding the existing CRM strategies in Indian banking
sector. Now day’s banks are more focusing on marketing strategy. The dynamics of the
marketplace have created pressure on employees to focus on pushing products to the
customers rather than to try and facilitate good experience to the customers. Front office
executives should stop looking at customers for multiple product promotion and starts
focusing on making the customers feel comfortable in terms of service consumption. Indian
banks have recorded a phenomenal growth in the past decade with the initiation of Economic
reforms. The banks, public, private and cooperative sectors have transformed themselves into
profit-oriented business organizations besides playing a developmental role in the economy.
In an attempt to be more profitable, the banks have become competitive and more customer-
oriented. This new orientation has compelled them to take a more pragmatic approach for
conducting the business. The CRM is one such tool which helps in meeting the customer’s
expectations according to their changing needs. While analysing the CRM implementation
the CRM practices more effectively when compared to their public sector counterparts. This
indicated that strategically speaking, the Private Sector Banks have been more innovative in
understanding their customers and in building good relations with them and co-operative
sector banks to improve their over product and services.

Page | 47
1. Name: _________________________________________________.
2. E-mail: _________________________________________________.
3. Age: below 30 [ ], 30-40 [ ], 40-50 [ ], 50 and above [ ].
4. Gender: Male [ ], Female [ ].
5. Occupation: Salaried [ ], Businessman [ ], Professional [ ], housewife [].
6. To which bank you are the customer:
7. Which products/services you are taking from bank:
FD[ ], Current Acc.[ ], other[ ].
8. Which environmental forces influence you the most to select your bank:
Reputation[ ], Nearness[ ], Commercials[ ], Friends/family[ ].


1. Level of product Knowledge:

5[ ], 4[ ],3[ ],2[ ],1[ ].
2. Quality of response to customer queries on product/services.
5[ ], 4[ ],3[ ],2[ ],1[ ].
3. Understanding of customers need and unique perspective.
5[ ], 4[ ],3[ ],2[ ],1[ ].
4. Availability and quality brochure, sales material.
5[ ], 4[ ],3[ ],2[ ],1[ ].

Service Delivery Experience:

1. Timeliness of service delivery.

5[ ], 4[ ],3[ ],2[ ],1[ ].
2. Sharing of status while work in progress.
5[ ], 4[ ],3[ ],2[ ],1[ ].
3. Quality & sophistication of delivery.
5[ ], 4[ ],3[ ],2[ ],1[ ].
4. Behaviour & mannerism of delivery staff.
5[ ], 4[ ],3[ ],2[ ],1[ ].
5. Level of congruence between time taken to deliver the service and
stipulated time.
5[ ], 4[ ],3[ ],2[ ],1[ ].

Page | 48
Service Experience:

1. Level of service quality Vis-à-vis.

5[ ], 4[ ],3[ ],2[ ],1[ ].
2. Level of need fulfilment Vis-à-vis expected.
5[ ], 4[ ],3[ ],2[ ],1[ ].

Relationship & experience:

1. Frequency and quality of service.

5[ ], 4[ ],3[ ],2[ ],1[ ].
2. Knowledge of company products and customer opportunity.
5[ ], 4[ ],3[ ],2[ ],1[ ].
3. Conduct and communication of relationship person.
5[ ], 4[ ],3[ ],2[ ],1[ ].

Grievance Handling:

1. Timeliness of complaint resolution.

5[ ], 4[ ],3[ ],2[ ],1[ ].
2. Quality of complaint resolution.
5[ ], 4[ ],3[ ],2[ ],1[ ].
3. Level of iteration till the complaint was resolve.
5[ ], 4[ ],3[ ],2[ ],1[ ].
4. Knowledge and empathy of the customer service staff.
5[ ], 4[ ],3[ ],2[ ],1[ ].

Overall satisfaction:

5[ ], 4[ ],3[ ],2[ ],1[ ].

Page | 49

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Page | 50
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