CUSTOMERS’ SATISFACTION IN COMMERCIAL

BANKS OF NEPAL
Dr. Jitendra Prasad Upadhyay
Associate Professor, Nepal Commerce Campus T. U, Nepal

ABSTRACT
Background - Customer satisfaction is nothing more than a snapshot of how customers feel about
organization’s products, services and brands, at a given point of time. The question is not how satisfied
customers are, but how emotionally attached they are to organization’s products, services and brands.
Purpose – The purpose of this study is to examine the level of customer satisfaction in the commercial banks
Methodology Used – Descriptive and analytical research designs have been used for the study. Primary data
have been collected through the questionnaires using judgmental sampling from the commercial banks of Nepal.
Questionnaires have been developed in five scales and mean, standard deviation and coefficient of variation
have been used as tools.
Cronbach’s alpha test has been done to test the reliability of the data.
Findings – All the commercial banks have been able to satisfy their customers.
Key words: Customer Satisfaction
Paper Type: Research

I. BACKGROUND

Customer satisfaction is a measure of how products and services supplied by a company meet or
surpass customer expectations. It is typically defined as a post consumption evaluating judgment concerning a
specific product or service, (Gunderson, 1996).
Customer satisfaction translates to customer loyalty, and loyalty is one of the biggest drivers of corporate
growth. A loyal customer is certainly a satisfied customer, but a satisfied customer is not necessarily a loyal
customer. Researchers have taken a close look at customer loyalty over the years and have come to the
conclusion that the more a customer is emotionally and positively engaged with a brand, the higher the chance
of developing true loyalty.
Customer satisfaction is a business philosophy which focuses on the creation of value for customers,
anticipating and managing their expectations and demonstrating ability and responsibility to satisfy their needs.
Qualities of service and customer satisfaction are critical factors for success of any business, (Gronoos, 1990).
Customer expectation is the difference between the expectations of the customers before receiving the services
and perceptions of the customers after receiving the services. Customer satisfaction mainly depends on the
build-up of the perceived value which the customers have concerning a product or service, (Kotler, 2009).
When a company fails to meet customers’ expectations, they take actions i.e. they cancel services, they switch
the products and they change the organizations. They also share their experiences through tweets, chats, blogs,

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ratings, recommendations and warnings. In other words, customers are sharing their opinions and their
preferences with their neighbors, like-minded friends and their relatives in various ways.
1.1 Importance of Customer Satisfaction
Customer satisfaction is important because it provides marketers and business owners with a metric that they
can use to manage and improve their businesses.
a. Customer satisfaction is a gateway to earning customers loyalty.
b. It is a key metric for management success.
c. Measuring satisfaction lets you know if a customer will buy from you again.
d. Customers leave because of poor quality service more than price considerations.
e. It keeps you ahead of your competitors.
f. It promotes customer retention.
g. Acquiring new customers is more expensive than keeping the ones you already have.
h. Disgruntled customers will spread the word about your business.
i. It improves customer lifetime value.

II. COMMERCIAL BANKS

A bank can be defined as the financial intermediary between depositors and entrepreneurs. The intermediation
takes place when banks accept deposit from general public, corporate bodies and private organizations and
deploy that deposit for profitable purposes in the forms of loans and advances. A bank is also a financial service
institution that generates its earnings primarily by means of intermediations. A bank or banker is a dealer in
debts, his own and other people’s (Shekhar & Shekhar, 2000).
According, to Nepal Commercial Bank Act 2031 B.S. “A commercial bank refers to such type of bank which
deals in money exchange, accepting deposits and advancing loans and other commercial transactions other than
some special functions performed by specified bank such as co-operative, agriculture and industrial bank.”
There are altogether twenty eight commercial banks in Nepal out of which only three commercial banks are
government owned banks.

III. OBJECTIVES OF THE STUDY

The main objectives of this study are:
 To determine the customer satisfaction levels of the banks.
 To determine in which areas are the customers unsatisfied.
 To understand how unsatisfied customers can be made satisfied.

IV. METHODOLOGY USED

This study has followed both descriptive and empirical approach of research. A questionnaire survey has been
conducted for getting the answer of research questions. The questionnaire survey includes 15 questions.
Questionnaires were distributed to 30 customers in each bank. In order to increase the reliability and number of
responses, personal visits to each and every respondent were made to distribute and collect the questionnaire.

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Primary data have been analyzed using different statistical tools, like means, standard deviation; and coefficient
of variance. Five scale Likert Scale has been used for analysis.
There are total of twenty eight listed commercial banks in Nepal, which constitutes the population of the study.
For this study, only five commercial banks, i.e. Rastriya Banijya Bank (RBB), Nepal Bank Limited (NBL),
Agriculture Development Bank Nepal (ADBN), Standard Chartered Bank (SCB) and Nabil Bank Limited (Nabil)
have been selected as sample banks. Selection of sample is based on convenience basis and focused should be
given to government owned and private banks.
Cronbach’s Alpha test has been done to test the reliability of data. Each and every variable have been tested and
it was found that every variable reliability test was above 84%.
4.1 Respondent’s Profile
In this section, characteristics of respondents have been presented first gender wise and then after age wise.
a) Gender Wise Respondents
Name of the Banks Male (No.) % Female (No.) % Total %
Rastriya Banijya Bank 21 14.00 9 6.00 30 20
Nepal Bank Limited 22 14.67 8 5.33 30 20
Agriculture Development Bank 21 14.00 9 6.00 30 20
Standard Chartered Bank 17 11.33 13 8.67 30 20
Nabil Bank Limited 19 12.67 11 7.33 30 20
Total 100 66.67 50 33.33 150 100
Majority of respondents were males i.e. 66.67%. But female respondents were also satisfactory in number i.e. 50
out of 150.
The highest numbers of male respondents were in NBL while females in SCB i.e. 22 and 13 in number out of 30
respectively. Likewise, the lowest numbers of male respondents were in SCB and females were in NBL i.e. is 17
and 8 in number out of 30 respectively.
The reason behind low number of female respondents is that all banks have high number of male respondents.
b) Age Wise Respondents
Name of the Banks Below 25 % 25 to 50 % Above 50 % Total
Years Years Years
Rastriya Banijya Bank 8 5.33 12 8.00 10 6.67 30
Nepal Bank Limited 6 4.00 14 9.33 10 6.67 30
Agriculture Development Bank 8 5.33 11 7.33 11 7.33 30
Standard Chartered Bank 9 6.00 12 8.00 9 6.00 30
Nabil Bank Limited 7 4.67 11 7.33 12 8.00 30
Total 38 25.33 60 40.00 52 34.67 150
Majority of respondents were found in 25 to 50 years group 60 out of 150 i.e. 40%. Minority respondents were
in the group of below 25 years which was 38 out of 150 i.e. 25.33%. Respondents in the group of above 50
years were 52 i.e. 34.67%.

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V. ANALYSIS AND FINDINGS OF CUSTOMERS SATISFACTION
5.1 Customers Motivation (CM)
To what extent are the customers of the banks motivated by the bank? This question is very important for every
bank to motivate their customers for achieving its goals and objectives. Motivation results from a. understanding
needs and expectations of customers (NE), b. level of satisfaction with banks in regards of services (LS) and c.
bank cares about its customers (CC). In this regard three questions were asked to the customers.
Name of the Banks NE LS CC Total Mean S. D. C. V.
Rastriya Banijya Bank 3.2 3.2 3.3 9.7 3.23 0.58 17.96
Nepal Bank Limited 2.8 3.0 2.5 8.3 2.77 0.25 9.03
Agriculture Development Bank 3.0 3.1 2.7 8.8 2.93 0.21 7.12
Standard Chartered Bank 3.5 3.4 3.6 10.5 3.50 0.10 2.86
Nabil Bank Limited 3.7 3.6 3.5 10.8 3.60 0.10 2.78
Customer Motivation has ranged between 2.77 (NBL) and 3.60 (Nabil). Nabil, SCB and RBB seem to have
motivated their customers more compared to other government owned banks. NBL (2.77) and ADB (2.93) seem
to have motivated its customers less as their values are less than 3. All the commercial banks have understood
the needs and expectations of customers, and they care about their customers but NBL and ADB need to focus
more in this regard. Levels of satisfaction of all the customers in all the banks have been satisfactory.
The overall performance of the banks in terms of customers’ motivation is satisfactory. In all the banks, the
value of standard deviation has been below 1 and coefficient of variation has been 2.78% to 17.96%. This
clearly indicates the representative nature of the mean calculated.
5.2 Quality Services (QS)
How happy or satisfied the customers are with the services provided by the banks is another important issue.
Quality service is the image & impression that each bank has created in the minds of customers in terms of
banks’ professionalism, technical competencies, problem handling, reliability, banking services, and
relationship. Quality of services is reflected in terms of a. friendly behavior of bank’s staff (FB), b. reliability of
banking activities (RA) and c. bank’s efforts in handling of problems (EHP). To assess these aspects of quality
services, three questions were asked to the customers.
Name of the Banks FB RA EHP Total Mean S. D. C. V.
Rastriya Banijya Bank 3.5 3.4 3.0 9.9 3.30 0.26 7.88
Nepal Bank Limited 3.4 3.2 2.8 9.4 3.13 0.31 9.91
Agriculture Development Bank 3.5 3.3 2.7 9.5 3.17 0.42 13.25
Standard Chartered Bank 3.6 3.6 3.5 10.7 3.57 0.06 1.68
Nabil Bank Limited 3.7 3.7 3.6 11.0 3.67 0.06 1.64
Quality Service has ranged between 3.13 (NBL) and 3.67 (Nabil). Nabil has been much satisfactory to the
customers in terms of its quality service. All the banks provide friendly environment and able to gain trust of
their customers as the value of FE and RA have been more than 3 in all the banks. But in case of handling the
problems of the customers Nabil (3.6) and SCB (3.5) have been much satisfactory than RBB, NBL and ADB
whose value have been 3.0, 2.8 and 2.7 respectively.

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The overall performance of the banks in quality service is satisfactory. In all the cases, the value of standard
deviation has been below 1 and coefficient of variation has been 1.64% to 13.25%. This clearly indicates the
mean is dependable.
5.3 Innovativeness (I)
How much the banks are innovative in terms of changes and improvements (e.g. in strategies, policies, rules,
products etc.) and how they have impacted on customers’ satisfaction. Innovativeness involves a. changes and
improvements of infrastructure (CII), b. changes and improvement of products (CIP) and c. changes and
improvement in services (CIS). In this regard, three questions were asked to the customers.
Name of the Banks CII CIP CIS Total Mean S. D. C. V.
Rastriya Banijya Bank 3.0 3.2 3.2 9.4 3.13 0.12 3.83
Nepal Bank Limited 2.6 3.0 3.1 8.7 2.90 0.26 8.97
Agriculture Development Bank 2.5 3.1 3.2 8.8 2.93 0.38 12.97
Standard Chartered Bank 3.4 3.5 3.6 10.5 3.50 0.08 2.29
Nabil Bank Limited 3.5 3.4 3.5 10.4 3.47 0.06 1.73
Innovativeness value has ranged between 2.90 (NBL) and 3.50 (SCB). SCB has been found to be the most
innovative of all the banks. Nabil (3.47) and RBB (3.13) have been found more innovative in satisfying their
customers. Customers of NBL (2.90) and ADB (2.93) are moderately happy in terms of innovativeness as their
values have approximated 3. All the banks have made changes and improved in its products and services. But in
infrastructure improvement only Nabil and SCB have given more emphasis compared to other banks.
The overall innovativeness of the banks is moderately satisfactory. In all the cases, the value of standard
deviation has been below 1 and coefficient of variation has been 1.73% to 12.97%. This clearly indicates the
representative nature of the mean calculated.
5.4 Belongingness and Loyalty (BL)
Belongingness & loyalty of customers to the banks is very important. More specifically, how comfortable &
satisfied the customers are with the banks’ physical settings, employees, and brand name so as to continue their
membership with the banks in the future
Belongingness and loyalty focuses on a. customers feel proud being associated with its bank (FP), b. chances to
recommend the bank to others (RO) and c. want to continue business with the bank in future (BF). In this
regard, three questions were asked to the customers.
Name of the Banks FP RO BF Total Mean S. D. C. V.
Rastriya Banijya Bank 3.5 3.4 3.5 10.4 3.47 0.06 1.73
Nepal Bank Limited 3.2 3.2 3.3 9.7 3.23 0.06 1.86
Agriculture Development Bank 3.1 3.2 3.3 9.6 3.20 0.10 3.13
Standard Chartered Bank 3.4 3.4 3.6 10.4 3.47 0.16 4.61
Nabil Bank Limited 3.6 3.5 3.6 10.7 3.57 0.06 1.68
Belongingness and Loyalty has ranged between 3.20 (ADB) and 3.57 (Nabil). Nabil has been much successful
in turning their customers loyal. All other banks also have been successful in turning their customers loyal as

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 their values have above 3. Customers of all banks have been feeling proud being associated with its banks.
Customers not only want to continue their business with the banks but also they recommend the bank to others.
To sum up, the overall performance of all the banks in terms of customer’s belongingness and loyalty is much
successful. In all the cases, the value of standard deviation has been below 1 and coefficient of variation has
been 1.68% to 4.61%. This clearly indicates the mean is dependable.
5.5 Communication (C)
How successfully the banks have been communicating their goals, policies, rules, and responding to customers’
requests, complaints, & needs.
Communication includes a. communicating objectives, rules, policies and strategies to the customers (COP), b.
bank’s respond to customer needs and request (CNR) and c. communicating about new products and services
(CPS). To assess the degree of effective communication, three questions were asked to the customers.
Name of the Banks COP CNR CPS Total Mean S. D. C. V.
Rastriya Banijya Bank 3.3 3.4 3.3 10 3.33 0.06 1.80
Nepal Bank Limited 3.2 3.3 3.3 9.8 3.27 0.06 1.83
Agriculture Development Bank 3.1 3.2 3.1 9.4 3.13 0.06 1.92
Standard Chartered Bank 3.4 3.5 3.3 10.2 3.40 0.10 2.94
Nabil Bank Limited 3.5 3.6 3.4 10.5 3.50 0.10 2.86
Communication value has ranged between 3.13 (ADB) and 3.50 (Nabil). The customers of all the banks have
been satisfied with the communication system of the bank as their value is more than 3. All the banks are able to
communicate its rules, policy, strategies, new products and services to its customers. Similarly banks also have
been responded to customer needs and request.
The overall communication of the banks is satisfactory. In all the cases, the value of standard deviation has been
below 1 and coefficient of variation has been 1.80% to 2.94%. This clearly indicates the representative nature of
the mean calculated.
5.6 Overall Customers Satisfaction of the Banks
So far, different sub components of customers’ satisfaction have been analyzed. In this section, an attempt has
been made to assess the overall customers’ satisfaction keeping in mind all the components.
Name of the Banks CM QS I BL C Total Mean S. D. C. V.
Rastriya Banijya Bank 3.23 3.30 3.13 3.47 3.33 16.46 3.29 0.13 3.95
Nepal Bank Limited 2.77 3.13 2.90 3.23 3.27 15.30 3.06 0.22 7.19
Agriculture Development Bank 2.93 3.17 2.93 3.20 3.13 15.36 3.07 0.13 4.23
Standard Chartered Bank 3.50 3.57 3.50 3.47 3.40 17.44 3.49 0.06 1.72
Nabil Bank Limited 3.60 3.67 3.47 3.57 3.50 17.81 3.56 0.08 2.25
Overall Customer Satisfaction has ranged between 3.06 (NBL) and 3.56 (Nabil). Nabil and SCB have been
much successful in customer satisfaction compared to government banks i.e. RBB, NBL and ADB. The
performance of RBB has been satisfactory compared to NBL and ADB.
The overall performances of all the banks in terms of Customer Satisfaction have been satisfactory. In all the
cases, the value of standard deviation has been below 1 and coefficient of variation has been 1.72% to 7.19%.
This clearly indicates the representative nature of the mean calculated.

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VI. CONCLUSION
A customer is an individual or business that purchases the goods or services produced by a business; either
service or manufacturing. Attracting customers is the primary goal of most businesses, because it is the
customer who creates demand for goods and services. Customer is the God for any business. Every organization
has to play different activities to satisfy its customers. Customer satisfaction is a measure of how products and
services supplied by organizations meet the customer expectation. Customer expectation is the difference
between the expectations of the customers before and after receiving the services.
It is found that the overall performances of all the banks in terms of customer satisfaction have been satisfactory.
Compared to government owned commercial banks performance of private banks have been satisfactory.
Among different government banks the performance of RBB has been better than NBL and ADB.

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