IMPACT OF SERVQUAL DIMENSIONS ON

CUSTOMER SATISFACTION IN NEPALESE

COMMERCIAL BANKS

Asmita Shrestha

Exam Roll No: 18220389

P.U. Registration No: 2018-2-22-0339

A Graduate Research Project Report Submitted to

Ace Institute of Management

Pokhara University

Submitted for the Degree of

Master’s in Business Administration (MBA)

Kathmandu

February, 2021
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ACKNOWLEDGEMENTS

This study entitled “Impact of SERVQUAL dimensions on customer satisfaction in

Nepalese Commercial Banks” has been conducted to satisfy the partial requirements
for the degree of Masters of Business Administration of Pokhara University. Every
project big or small is successful largely due to the effort of a number of wonderful
people who have always given their valuable advice or lent a helping hand. I sincerely
appreciate the inspiration; support and guidance of all those people who have been
instrumental in making this study a success.

First of all, I would like to extend my immense gratitude to my honorable supervisor,

Ms. Puja Tamang whose valuable supervision and guidance have been the major
boost in completing this study. I am highly indebted and very thankful for her
continuous support and constructive suggestions that have enabled this research
project to achieve its present form. Moreover, I am also indebted and thankful to her
for her motivation, support and instruction in completing my overall MBA degree.

Similar, profound gratitude goes to, Mr. Ajay Kumar Shah of Ace Research Center
for his constant faith, guidance, and for the support he provided when it mattered.

I also highly appreciate the efforts, supervision, guidance and inspirations of all the
faculties of Ace Institute of Management not only throughout this study but
throughout the whole MBA course. Also, my huge thanks go to all the respondents
who gave their valuable opinion and fill out the questionnaire to complete this study.

Last but not the least; I would like to express my warm respect to my parents and my
siblings for their affection and emotional support that has inspired me to achieve
every success including this study. I would also like to take full responsibility of any
kind of deficiency presented in this study.

Sincerely,
Asmita Shrestha
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CERTIFICATE OF AUTHORSHIP

I hereby declare that this submission is my own work and that to the best of my
knowledge and belief, it contains no material previously published or written by
another person, nor material which to a substantial extent has been accepted for the
award of any other degree of a university or other institution of higher learning,
except where due acknowledgement is made in the acknowledgements.

……………………………………

Asmita Shrestha
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APPROVAL SHEET

Recommendation for Approval

This GRP report prepared and submitted by Asmita Shrestha in partial fulfillment of
the requirement for the degree of Master of Business Administration has been
supervised by me and I recommend it for acceptance.

…………...……….

Ms. Puja Tamang

Date:

Acceptance of the External Evaluator

I approve the GRP submitted by Asmita Shrestha. The grade sheet has been submitted
to the Dean, School of Business, Pokhara University through the college on a separate
evaluation sheet.

…………...……….

External Evaluator

Date:

Viva Examination

Ms. Asmita Shrestha has successfully defended the GRP. We recommend it for
acceptance. The grade sheet has been submitted to the Dean, Pokhara University
through the college on a separate evaluation sheet.

External Examiner ………………………

GRP Advisor ….………………….

Internal Examiner ......................

Date:
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TABLE OF CONTENTS
ACKNOWLEDGEMENTS ........................................................................................ i
CERTIFICATE OF AUTHORSHIP .......................................................................... ii
APPROVAL SHEET ................................................................................................ iii
LIST OF TABLES ................................................................................................... vi
LIST OF FIGURE ................................................................................................... vii
ABBREVIATIONS ................................................................................................ viii
EXECUTIVE SUMMARY....................................................................................... ix
CHAPTER I .............................................................................................................. 1
INTRODUCTION ..................................................................................................... 1
Background of the Study ........................................................................................ 1
Statement of Problem ............................................................................................. 3
Objectives of the Study .......................................................................................... 4
Research Hypothesis .............................................................................................. 5
Significance of the Study ....................................................................................... 5
Limitations of the Study ......................................................................................... 6
Organization of the Study....................................................................................... 6
CHAPTER II ............................................................................................................. 8
LITERATURE REVIEW AND THEORETICAL FRAMEWORK ............................ 8
Review of Related Literature .................................................................................. 8
Research Gap ....................................................................................................... 20
Theoretical Framework ........................................................................................ 21
Specification of Variables .................................................................................... 23
CHAPTER III.......................................................................................................... 27
RESEARCH METHODOLOGY ............................................................................. 27
Research Design and Plan .................................................................................... 27
Population and Sample Size Determination .......................................................... 28
Data Collection Procedure.................................................................................... 29
Instrumentation of Data ........................................................................................ 29
Reliability and Validity ........................................................................................ 30
Data Analysis Plan ............................................................................................... 31
CHAPTER IV ......................................................................................................... 32
DATA ANALYSIS AND FINDINGS ..................................................................... 32
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Respondents’ Profile ............................................................................................ 32

Descriptive Analysis ............................................................................................ 36
Independent Sample T test ................................................................................... 42
One-Way ANOVA............................................................................................... 42
Correlation Analysis ............................................................................................ 46
Regression Analysis ............................................................................................. 47
Summary of Hypothesis ....................................................................................... 49
CHAPTER V........................................................................................................... 50
SUMMARY AND CONCLUSION ......................................................................... 50
Summary of Major Findings ................................................................................ 50
Conclusion ........................................................................................................... 52
Recommendations ................................................................................................ 54
Scope of the study ................................................................................................ 56
REFERENCES ........................................................................................................ 57
ANNEXES .............................................................................................................. 63
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LIST OF TABLES

Table 3. 1: Coefficient of Cronbach’s Alpha ............................................................ 31

Table 4. 1: Distribution by Gender ........................................................................... 32
Table 4. 2: Distribution by Age Group ..................................................................... 33
Table 4. 3: Distribution by Education Level ............................................................. 33
Table 4. 5: Distribution by Occupation .................................................................... 34
Table 4. 6: Distribution by Years of Account Used .................................................. 34
Table 4. 7: Distribution by Frequency of Using Bank Service .................................. 35
Table 4. 8: Distribution by Types of Account Used .................................................. 35
Table 4. 9: Analysis of Tangibility ........................................................................... 36
Table 4. 10: Analysis of Reliability .......................................................................... 37
Table 4. 11: Analysis of Responsiveness.................................................................. 38
Table 4. 12: Analysis of Assurance .......................................................................... 39
Table 4. 13: Analysis of Empathy ............................................................................ 40
Table 4. 14: Analysis of Customer Satisfaction ........................................................ 41
Table 4. 15: Analysis of Customer Satisfaction on the Basis of Gender .................... 42
Table 4. 16: Analysis of Customer Satisfaction on the Basis of Age Group .............. 42
Table 4. 17: Analysis of Customer Satisfaction on the Basis of Education Level ...... 43
Table 4. 18: Analysis of Customer Satisfaction on the Basis of Income Level .......... 44
Table 4. 20: Correlation Between SERVQUAL Dimensions and Customer Satisfaction
................................................................................................................................ 46
Table 4. 21: Regression Analysis of Variables ......................................................... 47
Table 4. 22: Summary of the Results of Hypothesis Testing .................................... 49
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LIST OF FIGURE

Figure 2. 1: Theoretical Framework ......................................................................... 22

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ABBREVIATIONS

ATM Automated Teller Machine

CCTV Closed Circuit Television

CFA Confirmatory Factor Analysis

ICT Information and Communications Technology

IPS Interbank Payment System

SEM Structural Equation Modelling

SERVQUAL Service Quality

SPSS Statistical Package of Social Science

VIF Variance Inflation Factor

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EXECUTIVE SUMMARY

Analyzing measures of customers’ satisfaction is an immense dilemma because

customer is becoming more demanding regarding service quality in banking sector of
Nepal. It is important to understand the impact of service quality on customer
satisfaction. Nowadays, the only demand of the customers is to get the good value for
their money. Due to increasing market competitiveness no one can deny the
significance of service quality. Therefore, it is challenging for the bankers to meet the
customer expectation. By reviewing this study, banking sector can have direction to
understand the major factors of service quality that influence customers’ satisfaction.
It also provides understanding that building long term and a strong customer relation
is critical for the banking industry. This study provides insight of service quality
impact on customer satisfaction in Nepalese commercial banks. This study is based on
the core dimensions of service quality i.e. tangibility, responsiveness, assurance,
empathy and reliability.

The study has employed descriptive and quantitative research design to estimate the
impact between dependent variable (customer satisfaction) with independent variables
(tangibility, reliability, responsiveness, assurance and empathy). The study is based on
primary sources of data. The primary data are used to extract the information from the
bank customer regarding the SERVQUAL dimensions. To achieve the purpose of the
study structured questionnaire was prepared and distributed. Altogether 250
questionnaires were collected form the respondent for the study.

The result showed the positive impact of tangibility, assurance and empathy
dimension with level of customer satisfaction whereas reliability and responsiveness
has no significant impact with customer satisfaction. This showed that customers are
satisfied with tangible variables in terms of physical facilities, equipment and parking
space availability. Customers can evaluate bank facilities, design, sufficiency and
vision equipment in the bank. It also revealed that customer’s complaints are dealt
according to the customer care standards and in mean time it discovered that bank
provides attention to each individuals’ need. From correlation analysis, there is
positive relationship between all SERVQUAL dimensions with dependent variables
i.e. customer satisfaction. The outcome illustrates that all SERVQUAL dimensions
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are needed to improve the level of customer satisfaction of Nepalese commercial

banks.

Therefore, linking the analysis part to the relation of service quality and satisfaction
side various useful results can be implicated. Primarily, bank staffs should show the
willingness to respond to the needs of the customers and should serve timely delivery
of the required needs. Secondly, they should maintain the promptness of service
delivery even on peak hours and should attend the complaints beyond working hours,
as far as possible to ensure positive impact on the level of customer satisfaction. This
study has tried to show the real scenario of service quality of commercial banks to
ensure high level of customer satisfaction in future.

Keywords: assurance, customer satisfaction, empathy, Nepalese commercial banks,

reliability, responsiveness, tangibility
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CHAPTER I

INTRODUCTION

Background of the Study

Service companies regard service quality a crucial tool to take care of their
competitive advantage within the marketplace. Due to the very fact that financial
services like banks' competition vary within the market using differentiated
products, these services are considered a basically competitive tool (Murugiah &
Akgam, 2015). In other words, a banking sector can attract customers by
providing top quality services. Therefore, structural adjustment has led to banks
that are ready to perform various activities which successively, allow them to be
more competitive even against non-bank financial institutions (Angur,
Nataraajan, & Jahera, 1999). In addition, banks play a significant and vital role in
financial development and economic growth in Nepal. Efficient banking system
greatly influences the growth of the Nepalese economy in different sectors.

Furthermore, practitioners within the banking sector face many complex

challenges within the global market. It is important for banks to raised understand
the changing customer requirements and adopt the newest information technology
system to compete more effectively with global organizations (Lau, Cheung,
Lam, & Chu, 2013). Moreover, service sector like banks have the
responsibility to supply the simplest services to their customers so as to
possess sustainable competitive advantages. Due to the critical quality of service
to business, it's difficult for service providers to live the standard of services. The
difficulty of measuring the service quality stems from its intangibility,
diversity, and therefore the difficulty of separation (El Saghier & Nathan, 2013).

In this vision, the service requires an independent framework for explain ing and
measuring quality. Among the key frameworks, service quality model developed
by (Parasuraman, Berry, & Zeithaml, 1985) is that the hottest model and is
widely wont to measure the standard of service in the service industry.
Furthermore, no new researches have included decision-making factors like the
tangible quality of service product and therefore the quality of service
environment. These factors play a vital role in the service environment, especially
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in the environment of the bank, because they become a sign of quality to the
customer (Dennis, Merrilees, & Herington, 2009).

The banking industry of Nepal has seen many changes. There has been a beautiful
move in its working condition amid the foremost recent decade. Banks have
focused to make procedures to separate themselves from their rivals, and giving
their customers top notch banking services and a really innovative experience.
due to the fast evolving condition, service quality and customer satisfaction, is
getting much importance in banking sectors. Customer service may be a basic
element within the financial organization to contend within the market driven
condition. Estimation of service quality isn't a simple task in banking, because of
intangibility of services in nature.

This study measures the extent of impact of SERVQUAL dimensions on customer

satisfaction. While examining the scale of SERVQUAL, it explains the link
between service quality with customer satisfaction to retain them in industry of
Nepal. A satisfied customer stays with the bank and brings new customers. But
the flip side is more severe, as unsatisfied customers not only discontinue their
association with the bank, but also keep the new customers unfree by spreading a
negative word of mouth.

Therefore, banking sector must strive to grasp what determines the customer
satisfaction, as this information will better equip it to create up for its
shortcomings, while also enabling it to serve the shoppers better. This study
explores whether the banking sector is acquainted with the impact of
SERVQUAL dimensions or not and to make satisfaction. Additionally, the study
highlights the weak areas where the bank is required to boost its services. This
study reveals the foremost factors of service quality in banking system of Nepal.
It explains the connection and impact of SERVQUAL dimensions on customer
satisfaction. It provides sufficient evidence to the banking sector to boost the
service quality standards, plus customer retention and engagement to upgrade the
ratings of respective bank within the mind of customer.
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Statement of Problem

Traditional purpose of the bank was to mobilize the savings of the customer and offer
loans to customers from an equivalent. But now the aim of the bank has changed
widely and it includes varied services say, insurance, mutual fund services and issuing
of new shares of other organizations. For success and survival in today’s competitive
banking sector, delivering quality service to customers is pivotal. In the present
Knowledge economy, as there is more awareness among the purchasers of their rights
and changing demands, it becomes mandatory for the banks to supply service quality
for their customers to make them satisfy. Hence there is requirement for banks to
settle on their strategies which will differentiate them from another to compete in the
competitive edge.

Banks are now become more competitive through the merging approach. They are
less in number comparing previously but their service and facilities are improving day
by day with the utilization of technologies available like internet banking, M- Wallet,
ATM services, Connect IPS, etc. Though, all the banks are providing the superior
services with the various schemes to the customers in the competitive market with the
use of advanced technologies, still the grievances and the difficulties of the customers
is not lower down to zero level. Thus, this study tries to identify the problem related
with tangibility, reliability, responsiveness, empathy or assurance dimensions to make
the customer satisfy and to identify the impact of service quality on customer
satisfaction and the dimensions that needs to be improved in banking sectors to make
customers satisfy.

In addition, many researches were found on measuring the impact of service quality
on hotels, airlines, retail industry, tourism industry, etc. But only few of the research
was found on measuring the service quality on customer satisfaction in the banking
sectors of Nepal. Hence, this research helps to investigate the relationship and impact
of SERVQUAL dimensions on customer satisfaction. Through this study we can find
out which independent variables affect customer satisfaction in Nepalese commercial
banks. This research deals with:

 Is there any impact between SERVQUAL dimensions and customer

satisfaction with services provided by Nepalese Commercial Banks?
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 What is the moderating effect of demographic variables between SERVQUAL

dimensions and customer satisfaction?
 Which of the independent variables has the most significant level in
determining the customer satisfaction in Nepalese Commercial Banks?

Objectives of the Study

Customer Satisfaction may be a key component of business methodology which

determines the bearing of service performance. Customer Satisfaction was given a
couple of definitions which may be in various circumstances and they are constantly
identified with both products and services. The customer satisfaction was
characterized as the customer`s evaluation a product or service as far as whether that
product or service has addressed the customer's needs and expectation (Zeithaml,
Bitner, & Pandit, 2000); as indicated by them, there are variables that impact
customer satisfaction. Customer satisfaction is the main basis for deciding the
standard that is really delivered to customer through the production and service, and
by the going with servicing. Basically, this paper deals with the study of customer
satisfaction in relation to the impact of SERVQUAL dimensions in Nepalese
commercial banks.

Thus, to achieve the above mention principal objective, following are the further
objectives of the study:

 To measure the level of customer satisfaction of service quality offered by

Nepalese commercial banks.
 To examine the impact of empathy, tangibility, reliability, assurance and
responsiveness dimensions of SERVQUAL on customer satisfaction.
 To determine the major dimension of SERVQUAL that fosters customer
satisfaction in Nepalese commercial banks.
 To analyze the relationship between SERVQUAL dimensions and customer
satisfaction.
 To identify the moderating effect of demographic variables between
SERVQUAL dimensions and customer satisfaction.
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Research Hypothesis

The impact of SERVQUAL dimensions on customer satisfaction has been studied in

this paper. Tangibility, assurance, empathy, responsiveness, reliability and satisfaction
are hypothesized.

The following are the research hypothesis which has been examined in this paper:

H1: There is significant impact between tangibility and customer satisfaction.

H2: There is significant impact between reliability and customer satisfaction.

H3: There is significant impact between responsiveness and customer satisfaction.

H4: There is significant impact between assurance and customer satisfaction.

H5: There is significant impact between empathy and customer satisfaction.

H6: There is significant impact between gender and customer satisfaction.

H7: There is significant impact between age group and customer satisfaction.

H8: There is significant impact between education level and customer satisfaction.

H9: There is significant impact between income level and customer satisfaction.

H10: There is significant impact between occupation and customer satisfaction.

Significance of the Study

This study determines the important quality dimensions to Nepalese commercial

banks to enable the bank to develop strategies and improve the standard of service
delivery. This can improve the competitive position of the bank within
the industry and make sure the survival of the bank, especially in an era of intense
competition. Through measuring the level of customer satisfaction; Nepalese banks
can develop a customer-centric approach to house customer service, avoid the
tendency of existing customers, and switch to a competing bank.
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Furthermore, this study functions as guide for Nepalese commercial banks to develop
policies that may improve overall service delivery, particularly in areas where the gap
between expectation and perception so wide to boost customer satisfaction. Nepalese
banks would supply comparative advantages to become the foremost preferred
bank within the banking sector. In accordance with good services, banks and
corporations alike can benchmark Nepalese banks policies and techniques for
improving the standard of their programmer which results in an overall
increase within the banking sector and will translate to other sectors of the economy.

Limitations of the Study

The study aims to examine the impact between empathy, tangibility, reliability,
assurance and responsiveness dimensions of SERVQUAL with customer satisfaction.
Despite of sincere effort, there exist various limitations of the study. Some limitations
need consideration in order to generate the accurate results. The major limitations of
the study are listed below:

 The sample size of the study is limited to 250 which may not give strong
accurate result.
 The study is predominantly based on primary source of data. Therefore, the
reliability of conclusion of study depends upon the accuracy of the
information provided by the respondents.
 This study has considered few demographic variables only. Namely: gender,
age group, income level, education level and occupation.
 Difficulty in reaching out the sampled customers of banking sectors with
printed questionnaires due to the pandemic distress occurring throughout the
world (Covid-19).

Organization of the Study

There are total of five chapters in this research paper as prescribed by Pokhara
University (PU) guidelines. These chapters consist of other following subtopics which
has been described in the following paragraphs:
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Chapter I: It considers the introduction part and deals with the subject matter of the
study that includes objectives, significance, research problem, research hypothesis,
limitation of the study and organization of the study.

Chapter II: It includes the reviews of other related articles. Alongside, there is
theoretical framework and research gap of the study.

Chapter III: It includes the detailed research methodologies that contains research
design and plan, population and sample size determination, source and nature of data,
instrument of data, reliability and validity of data, data collection procedure and data
analysis plan. Software like SPSS and Excel has been used to analyze the data.

Chapter IV: It involves the main body of the study on data analysis and findings. It
focuses on the systematic representation of the data that has been collected. Various
independent and dependent data are analyzed with a proper illustration in the form of
tables.

Chapter V: It includes the summary overview on all works carried out in chapter one
through four including major conclusions derived from the study. This chapter
includes a separate section for recommendation based on the major findings of the
study. In addition, references and annexes are also attached at the end of the report.
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CHAPTER II

LITERATURE REVIEW AND THEORETICAL FRAMEWORK

Review of Related Literature

Mitchell (1990) studied the emergence in the financial services sector where
organizations are actively promoting customer care/service quality programmers. The
understanding of the bank which assure the service quality received by the customers.
Following factor analysis and testing led to these ten dimensions being condensed to
five (Parasuraman, Zeithaml, & Berry, 1988):

 Tangibles - It represents the physical facilities, equipment, appearance of contact

personnel.
 Reliability - It is the ability to perform the promised service dependably and
accurately.
 Responsiveness - It denotes the willingness to help customers and to provide a
prompt service.
 Assurance - It is the knowledge and courtesy of employees and their ability to
inspire trust and confidence.
 Empathy - It refers caring, individualized attention the company provides its
customers

The importance of quality service is now well accepted, and service-based

organizations are addressing increasing attention to service excellence in their
corporate strategy and planning, in the anticipation of achieving a differential
advantage over their competitors. The dimensions of service quality are wide reaching
and measurement schemes and tools are continually being developed. But
SERVQUAL remains the most trustworthy tool available for the measurement of
service quality in the 1990s.

Lassar, Manolis, and Winsor (2000) examined the effects of service quality on
customer satisfaction from two distinct methodological perspectives. A study
applying a sample of international private banking customers is showed wherein
service quality is operationalized via two different and recognized measures
SERVQUAL and Technical/ Functional Quality. Indeed, this research examines the
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potential utility of employing separate measures for customer satisfaction from the
perspectives of both technical and functional aspects of the service delivery process.
The result indicates that these models of service quality do not perform equivalently
in this particular setting. Although the Technical/Functional Quality dimensions
reliably predicted levels of customer satisfaction, a majority of the SERVQUAL
dimensions did not. To the extent that the private banking industry represents both a
high-contact and high-level service situation, we might conclude that the
Technical/Functional Quality-based model of service quality compared with the
SERVQUAL-based model is better suited to predict customer satisfaction when
customers are actively involved or highly interested in service delivery (Lovelock,
1996).

Arasli, Mahtap-Smadi, and Katircioglu (2005) examined the relationship between

service quality, customer satisfaction and positive word of mouth, within the light of
fixing bank market dynamics because of EU accession. After descriptive and factor
analysis, multivariate regression analysis was used to estimate the impact of service
quality dimensions on overall customer satisfaction and also the impact of satisfaction
on positive word of mouth. The SERVQUAL scale proved to be of a three-
dimensional structure during this study. Results revealed that the expectations of bank
customers weren't met where the largest gap was obtained within the responsiveness-
empathy dimension. Reliability items had the highest effect on customer satisfaction,
which successively had a statistically significant impact on the positive word of
mouth.

Kheng, Mahamad, and Ramayah (2010) focused on the changing role of the banking
industry and its dynamic financial market. The underlying model of SERVQUAL
(Parasuraman, Zeithaml, & Berry, 1988) with five dimensions was utilized by this
research to gauge the impact of service quality on customer loyalty among bank
customers in Penang, Malaysia with customer satisfaction mediating variables. The
population frame is customers of assorted local banks in Penang Island. Self-
administered questionnaire was wont to gather data from various bank
customers. multivariate analysis shows that tangibles don't have any significant
impact on customer loyalty. This result's contrary to the findings by (Sureshchandar,
Rajendran, & Anantharaman, 2003). It's been observed that there's a changing trend
 10

and respondents didn't treat tangibles as a very important measurement

anymore because of availability of self-service terminals. The service quality
dimensions that play a big role during this equation are reliability, empathy, and
assurance.

Ananth, Ramesh, and Prabaharan (2010) evaluated the customer perceptions of

service quality in selected private sector banks. For analysis of data, Gap analysis and
Multi regression were used. The result shows that the dimension of service quality
like Empathy and Accessibility has more gap, because the customer expectations are
high to their perceived service. The finding also shows that Empathy-Reliability-
Assurance positively influences the service quality. The finding of the study implies
that bank should decrease the service gap to deliver superior quality of service to
retain existing customers moreover on attracting new customers. Interpretations on
service reliability should be continuously obtained from customers. This will enhance
their service quality to an outsized extent.

Awan, Bukhari, and Iqbal (2011) investigated the service quality and its relationship
to customer satisfaction among the customers of conventional banks and Islamic
banks. The modified SERVQUAL scale is applied to ascertain the functional
dimensions of service quality specific to the industry and service. Analytical hierarchy
process was to analyzed the data and to identify service quality and customer
satisfaction-related factors for Islamic and conventional banks. This study resulted;
from regression analysis of the relationship between multidimensional service quality
dimensions and unidimensional customer satisfaction factors also validated the
importance of service quality aspects for behavioral intentions (satisfaction, feelings)
for customers from conventional banks and Islamic banks.

Dinh and Pickler (2012) determined whether service quality dimensions (tangibility,
reliability, responsiveness, assurance, and empathy) have an association with overall
customer satisfaction. The use of a quantitative research methodology with a
correlational design was taken to analyze. The interrelationships of perceived service
quality dimensions were investigated through correlation analysis. This study
concluded that there was a statistically significant correlation between overall
satisfaction and perceived service quality among retail banking customers in Vietnam.
 11

However, all five dimensions were significant determinants of customer satisfaction in

banks in Vietnam, reliability and empathy were the most important factors.

Shanka (2012) measured the quality of service offered by private banks operating in
Ethiopia. This study investigates the relationship between service quality, customer
satisfaction and loyalty. The five dimensions of SERVPERF model i.e. reliability,
assurance, tangibility, empathy and responsiveness were used to measure the quality
of service offered by the private banks. Correlation and multiple regressions were
used to investigate the relationship between dependent and independent variables. The
finding shows that there is a positive correlation between the dimensions of service
quality and customer satisfaction. This study showed that offering quality service
have positive impact on overall customer satisfaction and empathy and responsiveness
plays the most significant role in customer satisfaction level followed by tangibility,
assurance, and finally the bank reliability. Further, the results indicate offering high
quality service increase customer satisfaction, which in turn leads to high level of
customer commitment and loyalty.

El Saghier and Nathan (2013) measured the service quality from customers’
perspective within the Egyptian banking. This study relies on a questionnaire survey
conducted in Egypt. This is an analytical study based mainly on the primary data
collected through a scientifically developed questionnaire. The results illustrate the
highest impact of the reliability on customer satisfaction, where a rise in reliability
will cause a rise in the customer satisfaction in banking sector. Similarly, the
customer satisfaction in banks in Egypt is directly affected by the responsiveness
where a rise in responsiveness will cause a direct increase in the customer satisfaction
in banks. Also, the customer satisfaction in Egyptian banking will be strongly affected
by empathy where a rise in empathy will causes a direct increase in the customer
satisfaction within Egyptian banking. Further the lowermost impact of the assurance
on customer satisfaction, where an increase in assurance by will cause a rise in the
customer satisfaction in Egyptian banking sector. Results supported on a factor
analysis identify four factors that influence users’ evaluation of service quality of
banking services. These factors are reliability, responsiveness, empathy and
assurance.
 12

Karim and Chowdhury (2014) determined the impact of service quality on customer
satisfaction within the private commercial banks of Bangladesh in terms of service
dimensions: Tangibles, Reliability, Responsiveness, Assurance and Empathy. A
convenience sampling process has been accustomed to collect data for this research.
After data collection, correlation and multiple regressions analysis are conducted to
check the strength of associations between the study variables. After analyzing the
impact of service quality on Customer satisfaction of private sector banks in
Bangladesh, it's observed that out of five service quality dimensions, Tangible has a
high Mean score and also the bank should target Responsiveness because it has the
least mean score. The study also established that the jumble of tangibility, reliability,
responsiveness, assurance and empathy together have significant effect on customer
satisfaction. Hence, service quality has positive impact on customer satisfaction.
These two variables should work hand in hand to confirm success and survival of the
private sector banks. The study accomplished that quality service is a very
important factor to satisfied customer satisfaction.

Vasumathi and Subashini (2015) conducted with main focus on the various
dimensions of service quality (SERVQUAL) of a Scheduled Bank that ultimately
leads to customer loyalty. Chi-square test, ANOVA, correlation and regression was
employed to analyzed the collected data. From the findings of the research, it’s gaudy
that the customers are satisfied with the reliability, responsiveness and tangibility
dimensions of SERVQUAL rendered by the staff members of the Scheduled Bank.
But empathy and assurance dimensions’ requisite more perfection to enhance
customer satisfaction.

Al-Azzam (2015) evaluated the effect of five dimensions’ of SERVQUAL on the

customer satisfaction among Arab bank customers in the city of Irbid. This study used
simple random sampling. For data collection, this study obtained data using primary
design data. This study used questionnaires as a medium for collecting data. This
study indicates that the higher the service quality, the more the costumer’s
satisfaction. The dimensions of service quality play an important role in this study.
The dimensions of SERVQUAL includes tangibility, responsiveness reliability,
empathy, and assurance. Finally, the findings indicate that these five factors have
positive impact on customer satisfaction. Also, this study shows that SERVQUAL is
 13

an appropriate tool to measure the quality of service in the banking sector in the Arab
bank. Therefore, the banking sector regard this instrument as very important tool to
evaluate, support, and improve the quality of their services in respective sectors.

Paul, Mittal, and Srivastav (2016) examined the impact of varied service quality
variables on the general satisfaction of consumers and compare the private and public
sector banks employing a sample from India. With the assistance of forward stepwise
regression, it explains how a range of variables are both negatively and positively
influencing customer satisfaction. within the case of private sector banks, knowledge
of products, response to wish, solving questions, fast service, quick connection to the
right person, and efforts to scale back queuing time were found to be the factors that
are positively related to overall satisfaction. Assistance to the customer, appearance,
and follow up are negatively related to customer satisfaction. On the
opposite hand, within the case of public sector banks, knowledge of product and fast
service are the factors which are associated positively and appearance is that the only
factor that's negatively associated. The components of service quality that are
positively associated don't seem to be the identical publicly sector banks as they're in
private sector banks.

Felix (2017) defined the association between service quality and customer satisfaction
in Banque Populaire du Rwanda, Kigali branches. it absolutely was supported both
descriptive and cross-sectional survey designs. Data were analyzed using frequencies
and percentages, means, and Pearson’s Linear correlation. The result showed a
major and positive relationship between service quality and customer satisfaction
while comparing dimension like customer loyalty with reliability, responsiveness and
assurance. Contrary, association supported positive word of mouth with service
quality sub-variables like Reliability, Assurance, tangibles, empathy and
responsiveness, revealed that there was no significant relationship between the
variables.

Ali and Raza (2017) measured the link between service quality and customer
satisfaction among the customers of Pakistani Islamic banks. The collection of data is
done through self-administered questionnaire with the assistance of modified
SERVQUAL dimensions. The sample data were statistically analyzed through
exploratory factor analysis followed by confirmatory factor analysis (CFA) and
 14

structural equation modelling (SEM) analysis. It determines the service quality

perception and customer satisfaction. Namely, CFA is employed so as to check the
model validity, while SEM is employed for testing the impact of various service
quality dimensions on customer satisfaction. Results revealed that the
multidimensional service quality scale is positively and significantly related to the
unidimensional scale of customer satisfaction. additionally, the compliance dimension
of the SERVQUAL model proved its importance by showing the very
best contributing think about the model. The study showed that every six dimensions
i.e. compliance, assurance, responsiveness, tangible, empathy and reliability of
service quality are distinct constructs. These dimensions have a direct and significant
impact on customer satisfaction in Islamic banks of Pakistan. The findings indicate
that service quality with the six dimensions of the study has suitable reliability,
whereas each dimension is positive and significantly related to Islamic bank service
quality.

Ajmal, Khan, and Fatima (2018) studied based on the core dimensions of service
quality i.e. tangibility, responsiveness, assurance, empathy and reliability. The results
of the study showed customer satisfaction based on service quality dimensions such as
tangibility, empathy and assurance having positive and significant relationship. Here,
reliability and responsiveness was not useful indicator for customer satisfaction
whereas assurance, responsiveness, tangibility and empathy reflect foremost impact
and positive relationship with customer satisfaction. Though, reliability once again
not found as useful estimator of customer satisfaction.

Salleh, Abdullah, Nawi, and Muhammad (2019) investigated the impacts of

(reliability, responsiveness, tangibility, assurance, empathy) on the satisfaction of the
customer in the Islamic banking industry. Though, there are different framework
available for service quality questionnaires are designed by using SERVQUAL model
then distributed by employing the convenient sampling technique. Then, the data
analyzed using Statistical Package for Social Scientist (SPSS). Finally, the result
indicated the relationship between assurance and empathy are very significance on
customer satisfaction while reliability, responsiveness and tangibility are not
significance on customer satisfaction.
 15

Jalagat, Pallada, Aquino, and Dalluay (2019) determined the impact of service quality
on customer satisfaction and customer loyalty as perceived by the customer
respondents. The descriptive research design with the survey questionnaires were
used to collect and analyzed the data. Convenience sampling was used to gather the
data. This study revealed that, there is significant relationship between service quality,
customer satisfaction and customer loyalty tested at 0.01 level of significance.
Regression analysis also showed that among the service quality dimensions, only
empathy and responsiveness significantly relates to customer satisfaction. Customer
satisfaction showed to moderately mediate the relationship between service quality
and customer loyalty. Likewise, the respondent banks may rank on empathy and
responsiveness considering the important relationship of these two variables on
customer satisfaction.

Afroz (2019) determined the effect of service quality on customer satisfaction both
from public and private banks in Tangail city. Descriptive and inferential statistics
were used in the analysis. To sightsee the relationship between service quality and
overall customer satisfaction, frequency distribution, descriptive statistics, correlation
and regression analysis was performed. From the analysis, the foremost important
service quality factor of banks is personal attention to the clients followed by error-
free records, safety in transaction, and tangible physical facilities of the bank. A
positive correlation between the performance of promises in time and professions of
the clients are perceived. After all, findings indicate that service quality and each
dimensions have significant and positive association with customer satisfaction. Thus,
this study has been specifically accompanied to contemplate this phenomenon and
seek empirical justification during this regard by considering service quality as the
main contributory factor towards customer satisfaction.

Baber (n. d.) investigated the gap between the level of service quality expectations
and perception and its impact on customer satisfaction in Islamic banks of Malaysia.
Shariah Compliance dimension was included within the SERVQUAL model of
service quality. during this study, data were statistically analyzed through reliability
analysis, paired sample t-test, exploratory factor analysis, regression analysis and
followed by confirmed confirmed factor analysis. Thus, there's a partial significant
gap between expected and perceived service quality level except in Shariah
 16

Compliance and tangibility. The study resulted that there's a positive and significant
impact of modified multidimensional SERVQUAL quality scale on customer
satisfaction. The study found a major difference between the level of expected and
actual service received by customers except within the case of Shariah compliance
and tangibility. The study was original and novel to seek out a high quality gap and its
impact on Malaysian Islamic bank customers and it'll help policymakers of Malaysia
and other countries to boost to satisfy customer expectations.

Customer Satisfaction in Banking Sector

In proportion to (Magesh, 2010), satisfaction means a sense of delight because

one has something or has achieved something. It is an action of fulfilling a
requirement, desire, demand or expectation. Customers compare their
expectations a few specific product or services and its actual benefits. Also,
Kotler and Armstrong (2010), satisfaction as a person’s feelings of delight or
disappointment resulting from the comparison of product’s perceived
performance in regard to expectations. Customer’s feelings and values also affect
their satisfaction level.

Razak, Chong, and Lin (2007) also reported that overall satisfaction is that
the outcome of customer’s evaluation of a group of experiences that are linked
with the precise service provider. It is shown that organization’s concentration on
customer expectations resulted into greater satisfaction. If the purchasers of a
corporation are satisfied by their services the result's that, they're going to be
loyal to them and consequently be retained by the organization, which is
affirmative for the organization because it could also mean higher profits, higher
market share, and increasing customer base (Karatepe, Yavas, & Babakus, 2005).

Customer satisfaction has become important thanks to increased

competition because it is taken into account vital think about the determination of
bank’s competitiveness (Berry, Seiders, & Grewal, 2002). Continuous
measurement of satisfaction level is important during a systematic manner.
Because satisfied customer is that the real asset for a corporation that ensures
long-term profitability even within the era of great competition. According to
Cronin, Brady, and Hult (2000), satisfied customer repeat his/her experience to
 17

shop for the products and also create new customers by communication of
positive message about it to others. On the opposite hand, dissatisfied customer
may switch to alternative products and services and communicate negative
message to others. Customer satisfaction may be a set of feeling or outcome
attached with customer’s experience towards any product and repair (Solomon,
1998). Hence, organizations must ensure the customer satisfaction regarding their
goods and services.

SERVQUAL Model

Parasuraman, Zeithaml, and Berry (1985) introduced the SERVQUAL scale

supported gap model. It was made to measure customer perception of service
quality, and offered ten dimensions of service quality: loyalty, responsiveness,
competence, access, courtesy, communication, credibility, security, understanding
(knowing the customer), and tangibles. Through these dimensions, customer
evaluates service quality. These were classified into two thoughts: first one
measures customer’s expectation about the firm, while the second measures
customer’s perception about the service. He presented various cracks between
customer perception and perceived service quality. Later, some scholars claimed
that these ten dimensions of SERVQUAL are overlapping and provides the
identical meaning. So, Parasuraman, Berry, and Zeithaml (1993) restructured the
SERVQUAL scale, and reset it into five dimension of service quality: loyalty,
responsiveness, tangibles, assurance, and empathy.

Bateson and Hoffman (2011) stated that as per SERVQUAL scale, the result from
each dimension of consumers’ expectation and consumers’ perceptions are
compared to estimate the gap in scores between the two components; so as that
the firms’ level of service quality can easily be defined. For example: the higher
the gap, the lower the service quality prediction and the lower the gap, the higher
will be the service quality prediction.

It highlights the foremost components of top quality service. The authors, initially
identified ten elements of service quality, but in later work, these were collapsed into
five factors - reliability, assurance, tangibles, empathy and responsiveness - that make
the acronym rater. Services using SERVQUAL to measure and manage service
 18

quality deploy a questionnaire that measures both the customer expectations of

service quality in terms of those five dimensions, and their perceptions of the service
they receive. Where customer expectations are superior than their perceptions of
received delivery, service quality is considered low. In additional to being a
measurement model, SERVQUAL is additionally a management model.

SERVQUAL Dimensions

SERVQUAL is defined as the degree of discrepancy between customers’ normative

expectation for service and their perceptions of service performance (Parasuraman,
Zeithaml, & Berry, 1985). It was later developed as “the total valuation of a selected
service agency that results from comparing that firm’s performance with the
customer’s general expectations of how firms in that industry should perform
(Parasuraman, Zeithaml, & Berry, 1988). It consists of five dimensions: tangibles
(appearance of physical facilities, equipment, personnel and written materials),
reliability (ability to perform the promised service dependably and accurately),
responsiveness (willingness to assist customers and deliver prompt service), assurance
(knowledge and courtesy of employees and their ability to stimulate trust and
confidence), and empathy (caring and individual attention the firm provides its
customers). Reliability is taken into account the vital core of service quality. Other
dimensions will matter to customers as long as service is reliable, because those
dimensions cannot catch up on unreliable service delivery (Berry, Parasuraman, &
Zeithaml, 1994). Five dimensions of SERVQUAL have been developed for the
service sector: tangibility, reliability, responsiveness, empathy and security (Ananth,
Ramesh, & Prabaharan, 2010).

Tangibility

Tangibility is referred to as Information and Communications Technology (ICT)

equipment, physical facilities and their appearance i.e. ambience, lighting, air
conditioning, seating arrangement; and lastly but not least, the services providing
personnel of the organization (Blery, Batistatos, Papastratou, Perifanos, Remoundaki,
& Retsian, 2009). Parasuraman, Zeithaml, and Berry (1985), defined tangibility as the
appearance of physical facilities, equipment, personnel, and written materials. In this
 19

research, tangibles are the facilities and the banking services offered by the employees
of the banks perceived by the banking customers.

Reliability

Khan, Lima, and Mahmud (2018) stated reliability as to provide precise and constant
benefit or service to the customers. Reliability is to provide promised, dependable,
accurate and consistent services to the customers. However, reliability depends on
handling customer service issues, performs the services right the first time; offers
services on time, and maintain a record of error-free (Khan & Fasih, 2014).

Responsiveness

Johnston (1997), responsiveness as speed and timeliness of service delivery. This

consists of processing speed and service capabilities to respond promptly to customer
service requests, and wait a short and queuing time. On other hand, it also contains
understanding the needs and requirements of the customer, easy operation time,
individual attention provided by the staff, attention to the problem and customers'
safety in their dealings (Kumar, Kee, & Manshor, 2009).

Empathy

Ananth, Ramesh, and Prabaharan (2010) reveals empathy in their research of private
sector banks, provide individual attention and easy operation time; give personal
attention, and understand the specific needs of customers. Also, by Johnston (1997),
empathy as the ability to make customers feel welcome, especially by staff contacts.
Additionally, the SERVQUAL model indicates that satisfaction is related to the size
and direction of disconfirmation of a person’s experience when they face the initial
expectations, (Parasuraman, Zeithaml, & Berry, 1985).

Assurance

Khan, Lima, and Mahmud (2018) concludes that the information that the passes with
their trust and certainty. Blery, Batistatos, Papastratou, Perifanos, Remoundaki, and
Retsian (2009), in this research; it is the level of knowledge and courtesy of
 20

employees for providing services and to build confidence in customer. Moreover,

Skilled employees who treat customers with respect and make consumers feel that
they can trust the firm exemplifies assurance.

Research Gap

Today, with increased competition, service quality has become a popular area for
academic studies and has been renowned as a competitive advantage and
compassionate relationship with satisfied customers. Also, quality of service has
become a significant tool in the service industry. According to El Saghier and
Nathan (2013), service quality is a significant indicator in the service industry and is
more significant for financial service providers who have exertion in showing their
customers product differentiation.

SERVQUAL dimensions has been uniquely analyzed but very few research has been
made in interlinking all the dimensions of SERVQUAL for customer satisfaction in
banking sectors of Nepal. Since there is no general agreement among researchers on
the measurement of service quality, many studies have used SERVQUAL instrument
to measure the customer satisfaction. Arasli, Smadi, and Katircioglu (2005) used the
SERVQUAL instruments: reliability which is the ability to perform the service in an
accurate and dependable manner; tangibles which refers to the appearance of physical
factors such as equipment, facilities and personnel; empathy involves providing
individual attention and care to customers; responsiveness is the willingness to
provide help and prompt service to customers; and assurance refers to the knowledge
and courtesy of employees and their ability to convey trust and confidence. Similarly,
Vasumathi and Subashini (2015) also used the five dimensions of SERVQUAL which
were tangibles, reliability, responsiveness, assurance and empathy. Most of the
research are based on the specific areas but this study covers the customers of all
Nepalese commercial banks.

There are numbers of service quality dimensions i.e. tangibility, reliability,

responsiveness, competence, courtesy, credibility, security, access, communication
and understanding the customer satisfaction. Pakurar, Haddad, Nagy, Popp, and Olah
(2019) showed a model that represents the effects of service quality dimensions on
customer satisfaction using the modified SERQUAL model. Three new dimensions
 21

were added to the original SERQUAL model, which consisted of five factors. The
new added factors are financial aspect, employee competences, and access. But, this
study is mainly based on the origin or the basic SERVQUAL dimensions model
which consists of only five dimensions i.e. reliability, responsiveness, assurance,
empathy, and tangibility, which are major dimensions that measures service quality in
Nepalese context.

This study could also hold a significant importance in its value since banking industry
lies under national and international format which could be useful to many other
sectors. Likewise, this research paper gives an overview of various SERVQUAL
components affecting the customer satisfaction in Nepalese Commercial Bank of
Nepal. Hence, the purpose of this research is to investigate the relationship and impact
of SERVQUAL dimensions on customer satisfaction in Nepalese Commercial Bank.

Theoretical Framework

Theoretical framework could be a basic theoretical structure organized around a

theory. It defines the sort of variables that are ongoing to be utilized in the analysis.
Theoretical framework could be a kind of intermediate theory that try to hook up
with all aspects of inquiry within problem definition, purpose, literature review,
methodology, data collection and analysis. Theoretical framework can act like map
that give coherence to empirical inquiry because the theoretical framework is
potentially so near empirical inquiry, take different form depending upon the research
question or problem.

Utmost studies approve that there is impact between service quality and customer
satisfaction. For instance, Parasuraman, Zeithaml, and Berry (1988) and Caruana
(2002) create a positive relationship between service quality and customer
satisfaction. Finally, this theoretical framework guiding the evaluation is depicted in
figure 1, adapted from (Berry, Parasuraman, & Zeithaml, 1994) and (Caruana, 2002).
Similarly, this study examined five variables of service quality namely: tangibles,
reliability, responsiveness, empathy, security and customer satisfaction. Based on the
previous study the following framework is developed.
 22

Figure 1 represents the diagram showing impact between independent variables and
dependent variables.

Independent Variables

Empathy

Reliability Dependent Variables

Assurance Customer Satisfaction

Tangibility
Moderating Variables

Responsiveness  Gender
 Age Group
 Education level
 Monthly Income
 Occupation

Figure 2. 1: Theoretical Framework

Based on the research objectives and the literatures applied in this study, the
theoretical framework was developed taking into consideration the variables used and
the flow of the entire study. It is developed through thorough researches performed on
past findings and studies. The framework is assisting throughout the designing and
execution of this research. In theoretical framework, it showed the predictor variable,
the five service quality dimension namely: tangibility, reliability, responsiveness,
assurance and empathy while the customer satisfaction served as the dependent
variable.
 23

Specification of Variables

Independent Variables

Tangibility

Parasuraman, Zeithaml, and Berry (1985), tangibility defined as the appearance of

physical facilities, equipment, personnel, and written materials. Ananth, Ramesh, and
Prabaharan (2010) referred to tangibility in their study of private sector banks as
modern looking equipment, physical facility, employees are well dressed and materials
are visually tempting. Five points likert scale was used to measure the related dimension
where 1 represent strongly disagree, 2 represent disagree, 3 represent neutral, 4
represent agree and 5 represent strongly agree. To measure this variable, the following
construct has been developed:

 I feel bank is equipped with good facilities, spacious building and well-
arranged.
 Bank provides adequate supplies such as bank statements, deposit and
withdrawal slips, and bank cards when I demand.
 I feel bank have pleasant and sufficient lobby and waiting area for customers.
 Bank provides signage for instructions and directions for easy processing to my
request.
 Bank has enough availability parking space for my vehicle.

Reliability

Reliability influenced by handling customer service issues, performs the services right
the first time; offers services on time, and maintain a record of error-free.
Additionally, reliability is defined as the most significant factor in conventional
service (Parasuraman, Zeithaml, & Berry, 1988). It also involves of the right order
fulfillment; accurate records; accurate quote; right in the bill; Outcomes are more
precise than commissions; keep the promise of service. Five points likert scale was
used to measure the related dimension where 1 represent strongly disagree, 2
represent disagree, 3 represent neutral, 4 represent agree and 5 represent strongly
agree. To measure this variable, the following construct has been developed:
 24

 I feel bank staff delivers the service with promptness and as promised.
 I assure bank has maintained an error-free and up-to-date records such as bills
and statements, etc.
 I think the services of the bank are delivered with accuracy.
 I feel secured as bank is physically monitored with devices such as CCTV
cameras.
 My transactions and records are kept with confidentiality.

Responsiveness

Responsiveness defined as the willingness to help customers and provide prompt

service (Parasuraman, Zeithaml, & Berry, 1988). It’s like speed and timeliness of
service delivery. This consists of processing speed and service capabilities to respond
promptly to customer service requests, and wait a short and queuing time. More
precisely, responsiveness is defined as the willingness or readiness of employees to
provide services. Five points likert scale was used to measure the related dimension
where 1 represent strongly disagree, 2 represent disagree, 3 represent neutral, 4
represent agree and 5 represent strongly agree. To measure this variable, the
following construct has been developed:

 Bank staffs show willingness to respond to my needs.

 I get quick response to complaints, if I have any.
 Bank serve timely delivery of my required needs.
 Bank staff maintains the promptness of service delivery even on peak hours to
me.
 Bank staff attends my complaints beyond working hours.

Empathy

Parasuraman, Zeithaml, and Berry (1985), empathy is defined as a caring and

individual attention that the firm provides to its clients. It encompasses giving
individual attention to employees who know the needs of their customers and
customer facilities during business hours. Moreover, Ananth, Ramesh, and
Prabaharan (2010), reveals empathy in their research of private sector banks, provide
individual attention and easy operation time; give personal attention, and understand
 25

the specific needs of customers. Five points likert scale was used to measure the
related dimension where 1 represent strongly disagree, 2 represent disagree, 3
represent neutral, 4 represent agree and 5 represent strongly agree. To measure this
variable, the following construct has been developed:

 I feel the working environment in the bank is customer-friendly.

 I ensure the bank’s location is accessible and the staff are approachable to me.
 I feel the bank offers minimal service charges.
 I feel bank provides attention to each individuals’ need.
 I feel bank cares by sending advisories and information of new offerings and
others.

Assurance

Parasuraman, Zeithaml, and Berry (1985), assurance is defined as knowledge and

courtesy of employees and their ability to inspire trust and confidence. Further,
assurance refers to the polite and friendly staff, provision of financial advice, interior
comfort, eases of access to account information and knowledgeable and experienced
management team. Five points likert scale was used to measure the related dimension
where 1 represent strongly disagree, 2 represent disagree, 3 represent neutral, 4
represent agree and 5 represent strongly agree. To measure this variable, the following
construct has been developed:

 The customers are assured that the staff in the bank know their jobs well.
 The bank staff shows politeness with the customers.
 The bank staff ensure that choosing this bank will provide them money’s
worth.
 Assurance that customer complaints will be dealt according to the customer
care standards.
 The bank assures the customers that the services and offerings provided
strictly follows the regulatory requirements and standards.
 26

Moderating Variables

These variables are the demographic and general variables like age, gender,
education, income level and occupation. These are also the personal information of
the respondents in this research work. To measure these general variables, the
categorical questions has been developed.

Dependent Variable

Customer Satisfaction

With better understanding of customers' perceptions, companies can determine the

actions required to meet the customers' needs. This helps to identify their own
strengths and weaknesses, where they stand in comparison to their competitors, chart
out paths for future progress and improvement (Magesh, 2010). In the banking
industry, a significant element of customer satisfaction is the nature of the relationship
between the customer and the provider of the products and services. Five points likert
scale was used to measure the related dimension where 1 represent strongly disagree,
2 represent disagree, 3 represent neutral, 4 represent agree and 5 represent strongly
agree. To measure this variable, the following construct has been developed:

 I am satisfied with the bank well-arranged structure and availability of enough

parking space near bank.
 I am satisfied with the way the employees deal with questions and complaints.
 I am satisfied with the customer friendly environment provided by the bank.
 I am satisfied with the promptness of the bank’s service delivery.
 I am satisfied that bank keeps transactions and records of customers in
confidential manner.
 I am satisfied with the service offering on deposits and loans of the bank.

This study is inspecting the impact of all the independent variables in dependent
variables which is customer satisfaction in Nepalese Commercial Bank. Also, the
hypothesis includes the moderating variables impacting the dependent variables.
 27

CHAPTER III

RESEARCH METHODOLOGY

Research methodology sets out overall plan associated with a study. It provides a
basic framework on which the study is predicated. Research methodology discussed
during this chapter helps to guide the research study providing different issues and
aspects. This chapter explains the methodology that is employed in this study which
includes nature and sources of data, sample selection and classification of variables,
validity and reliability test, techniques and steps adopted in interpreting and analyzing
the data. This chapter hence discusses the research methods that were used during the
research process. It includes the research methodology of the study from the research
strategy to the result dissemination.

Before presenting the analysis and interpretation of knowledge, it’s necessary that
research methodology be described first. This chapter presents all the necessary steps
to be followed throughout this research work in order to achieve and accomplish the
objectives of the study. Specially, the chapter provides the overall plan for the
collection, analysis and presentation of data required. This includes the methodologies
undertaken in relation to justification on research objectives, sampling process and
collection used for the study of SERVQUAL dimensions on customer satisfaction in
Nepalese Commercial banks.

Research Design and Plan

Mainly, the quantitative research design is used in this study with the descriptive
survey questionnaire. The quantitative approach is considered appropriate because it
helps to assess the impact between service quality and customer satisfaction as the
primary objective of this study. It also measures the relationship between the service
quality dimensions and customer satisfaction that requires statistical interpretation
through hypothetical assumption (Cresswell, 2011; Maxwell & Steele, 2003).

This study is based upon descriptive and inferential analysis to deal with the impact of
SERVQUAL dimensions on customer satisfaction in Nepalese commercial banks.
This study approves descriptive research design for fact finding and identifies
 28

adequate information about the impact of SERVQUAL dimensions on customer

satisfaction.

Similarly, the data collection is executed through a structured questionnaire with an

online form to meet the research objectives. Self-administered survey is implemented
with the help of the finalized questionnaire. Likewise, the results are based on the data
and facts provided by the sampled respondents. The instruments used for this research
is considered reliable. Quantitative data has been collected in Likert scale so that
consumer’s response could be quantified and measure easily in an unbiased manner
using a statistical model viz. SPSS, Microsoft Excel so that study attempted to explain
what has been observed regarding impact of SERVQUAL dimension on customer
satisfaction in Nepalese Commercial banks.

Population and Sample Size Determination

Population

This study deliberates to measure the impact of SERVQUAL dimension on customer

satisfaction in Nepalese Commercial banks. The population for the study is all the
bank account holders of Nepalese Commercial Banks. The study used convenience
sampling to track the respondents for the study. The sampling technique generally
assumes a homogeneous population that means the member of population poses
similar characteristics. This study generally includes the bank customer of Nepalese
Commercial Banks.

Sample Size

For the analysis of impact of SERVQUAL dimension on customer satisfaction in

Nepalese Commercial banks, questionnaires were passed on to 310 respondents and
280 were gathered completely but only 250 were received in usable form. The data
collection has been completely based on online survey system i.e. Google form. For
data collection, convenience sampling method has been used under non-random
sampling method. Therefore, a sample of 250 respondents were selected from the total
population of Commercial bank’s customers which includes customers from all
Nepalese commercial banks.
 29

Data Collection Procedure

This segment explains on how data has been collected for this study purpose. There
are all altogether 250 useful respondents. The research methodology adopted has been
basically based on primary data which the recent and accurate piece of first-hand
information would be collected. The study of descriptive research and involved the
use of survey method. Primary data has been collected through questionnaire survey
and used self- administered approach to obtain quantitative results. Electronic survey
methods have been used to collect sample data. In electronic method (google form),
links has been sent to respondents using the internet as a medium to conduct survey.

Instrumentation of Data

The primary data are used to identify the impact of SERVQUAL dimensions on
customer satisfaction in Nepalese Commercial banks. The survey questionnaire is
divided into two parts. Part I highlights the respondents’ demographic data such as
gender, age, education, monthly income, and occupation. This part of questionnaire
has been used for the descriptive analysis of the respondents.

The second part consists of the questions on the perception of respondents on the two
constructs: Service quality dimensions, and customer satisfaction. Questions on
service quality has been modified from (Parasuraman, Zeithaml, & Berry, 1988) and
thus, 25-item questions were generated and 6-items on customer satisfaction for a
total of 31 questions. The 5-point Likert scale was used which is a modified version of
the originally 7-point scale and was applied uniformly to the two constructs. The 5-
point Likert scale was used for the survey of which 1=Strongly Disagree, 2=Disagree,
3=Neutral, 4=Agree, and 5=Strongly Agree.

All the data gathered were considered for analysis using the SPSS and Microsoft
Excel. The first part consisting of the demographic data was analyzed using the
frequency and percentages while the second part, correlation matrix, regression
analysis, mean and standard deviation were used for the two main constructs (Service
quality dimension and customer satisfaction).

For the data analysis, SPSS tool has been used to tabulate and analyze the valid
responses. To analyze the data, comprehensive data file has been created then variable
 30

and their labels has been defined as well as its values were inserted. Different
statistical tools such as frequencies, percentage, mean, standard deviation, correlation
and regression analysis has been applied in determining which of the service quality
dimension variables significantly affects customer satisfaction. Microsoft excel sheet
was also used for the calculation of the average scores and used for the data collection
procedure and tables as required.

Reliability and Validity

Reliability of measurements specifies the quantity to which it’s disinterestedly and

hence ensures consistent measurement across time and across the varied items within
the instrument. In reliability analysis, it has been checked for the stability and
consistency of the data. In case of reliability analysis, this study checked the accuracy
and precision of the procedure of management. Though it has numerous definitions
and approaches, the concept comes to be consistent (Sileyew, 2019).

Validity is an indicator that makes it seem a reasonable measure of some variables, it

is the subjective judgement that the instrument measures what it intends to measure in
term of relevance. Validity refers to the truthfulness of findings. It determines whether
the study truly measures what it was intended to measure or how truthful the study
results are. It refers to the accuracy of a measure and a measurement is valid when it
measures and performs the functions that it supports to perform. It is the degree to
which a measure accurately represents what is supposed it to measure.

The reliability is determined through Cronbach’s alpha which measure the internal
consistency, i.e., how closely related a set of items are as a group. And, this study
followed the same method. It has been used in this study to test the validity and
reliability of the primary data for determining internal consistency among the various
SERVQUAL dimensions.

To test the validity, the questionnaire was examined as to construct validity to

ascertain that all components that should be measured has considered and pretested to
few people to make sure that the questionnaire attend the degree of fairness and
accuracy. Reliability test for all the components of questionnaire, SERVQUAL
dimensions and customer satisfaction in banking of Nepal was computed through
 31

SPSS. Cronbach alpha coefficient value more than 0.6 is consider as the reliable and
validate for further processing.

The reliability and validity results show that the instrument is both reliable and valid as
obtained Cronbach’s alpha was greater than 0.6. The independent variable of
tangibility, reliability, responsiveness, assurance and empathy with Cronbach’s alpha
of 0.820, 0.884, 0.868, 0.891 and 0.879 showed that variables are valid and reliable as
it is greater than 0.6. It indicates that the data taken for the study are reliable. Similarly,
dependent variable of customer satisfaction with Cronbach’s alpha of 0.896 which is
greater than 0.6 so, the instrument is considered to be reliable and thus valid for the
study.

Table 3. 1: Coefficient of Cronbach’s Alpha

Variables Cronbach’s alpha Remarks

Tangibility 0.820 Reliable
Reliability 0.884 Reliable
Responsiveness 0.868 Reliable
Assurance 0.891 Reliable
Empathy 0.879 Reliable
Customer Satisfaction 0.896 Reliable

Data Analysis Plan

In this segment, firstly, all data has been collected through questionnaire and then it
has been organized. Different types of questionnaires have been used such as
categorical questions and Likert scale questions. After gathering the entire completed
questionnaire from the respondents, it has been coded and tabulated into SPSS
worksheet for the analysis and interpretation of the data. Statistical package of social
science (SPSS) computer software and Microsoft Excel has been used. After the
analysis and interpretation of the responses, the result is presented. The various tools
such as frequencies, percentage, mean, descriptive statistics, correlation, and
regression has been used to derive the result.
 32

CHAPTER IV

DATA ANALYSIS AND FINDINGS

This chapter provides systematic presentation and analysis of primary data. Different
statistical and regression models described in previous chapter have been used for the
study purpose. This chapter is divided into three sections. The first section covers the
respondents profile and presents the results of questionnaire survey. The second
section covers the descriptive analysis and the analysis of regression model including
correlation analysis. The third section of this chapter deals with concluding remarks
on the basis of findings from primary data analysis.

This study is based on primary data analysis, which mainly deals with impact of
SERVQUAL dimensions on customer satisfaction. This section reports the result of
questionnaire survey conducted among bank customer. A set of questionnaires
including multiple choices and Likert scale questions. The respondents profile along
with their personal characteristics and result of the survey are presented in the
following sections. The percentage, frequency, mean value, correlation and regression
has been calculated to do the proper analysis of the data.

Respondents’ Profile

The respondent’s profile reveals the general characteristic of respondents combined on

the basis of different personal characteristics such as gender, age group, monthly
income, education level and occupation. Therefore, this section describes the
demographic characteristics of the respondents of bank customers.

Table 4. 1: Distribution by Gender

Gender Frequency Percent

Male 125 50
Female 125 50
Total 250 100

The table 4.1 shows the percentage distribution of gender. 50 percent of the
respondents were male and 50 percent of the respondents were female. This shows
that there is equal number of male and female among respondents in this survey.
 33

Table 4. 2: Distribution by Age Group

Age group Frequency Percent

18 -28 years 109 43.6
29-39 years 47 18.8
40-50 years 55 22.0
More than 50 years 39 15.6
Total 250 100.0

The table 4.2 shows the representation of age group of total number of respondents
during this research. According to the survey of 250 respondents; most of them are of
age 18-28 are of 43.6 percent, 29-39 are of 18.8 percent, 40-50 are of 22 percent and
more than 50 years are of 15.6 percent.

Table 4. 3: Distribution by Education Level

Education level Frequency Percent

SLC 46 18.4
+2 53 21.2
Bachelors 80 32.0
Above Masters 71 28.4
Total 250 100.0

The table 4.3 shows the distribution of respondent according to the education level.
Most of the respondents have completed Bachelors which are of 32 percent and above
masters are of 28.4 percent. Around 21.2 percent of respondents have completed their
+2 level of education while only 18.4 percent of respondents have just completed
SLC.

Table 4. 4: Distribution by Income Level

Monthly Income Frequency Percent

Less than 15000 105 42.0
15000-30000 54 21.6
30001-45000 52 20.8
Above 45000 39 15.6
Total 250 100.0
 34

The table 4.4 shows the distribution of income level of 250 respondents. The income
level of 42 percent of respondent is less than 15000 while 21.6 percent of the
respondent’s income is between 15,000 to 30,000. The income level of 20.8 percent
and 15.6 percent are between 30,001 to 45,000 and above 45,000 respectively. The
percentage of respondents with income less than 15,000 is higher here. This could
because these respondents prefer saving in banks instead of investment in other
sectors.

Table 4. 5: Distribution by Occupation

Occupation Frequency Percent

Government 44 17.6
Private 60 24.0
Student 50 20.0
Self employed 50 20.0
Unemployed 46 18.4
Total 250 100.0

The table 4.5 shows the distribution of respondent according to the occupation.
According to table, 17.6 percent of the respondents are holding government job while
correctly 24 percent of the respondents are from private job. The 20 percent of
respondents are students and same 20 percent are self- employed and around 18
percent of respondents are unemployed. This table reveals that majority of the
respondents are associated with private job.

Table 4. 6: Distribution by Years of Account Used

Years of account used Frequency Percent

Below 5 years 102 40.8
5-10 years 76 30.4
11 -13 years 46 18.4
Above 14 years 26 10.4
Total 250 100.0

The table 4.6 shows the distribution of years of the bank account used by 250
respondents. Majority of the respondent i.e. 40.8 percent have account below 5 years
in banks followed by 30.4 percent have account in between 5-10 years. Similarly,
 35

18.4 percent of respondents have bank account for 11-13 years and 10.4 percent have
above 14 years in this survey. This shows that the respondents having account for
more than 14 years is lesser in numbers.

Table 4. 7: Distribution by Frequency of Using Bank Service

Frequency of using bank service Frequency Percent

Daily 29 11.6
Weekly 67 26.8
Monthly 138 55.2
Yearly 16 6.4
Total 250 100.0

The table 4.7 shows the distribution of frequency of using the bank services.
Regarding the frequency of use, majority of the respondents are not frequent users.
55.2 percent of respondents use the service at most once in a month followed by 26.8
percent of respondents use the service in weekly basis. The respondent who use the
bank service daily is of 11.6 percent whereas 6.4 percent of respondents use the
service in yearly basis. This shows that the respondents who are using the bank
service in yearly basis are very less in number.

Table 4. 8: Distribution by Types of Account Used

Types of account used Frequency Percent

Current Account 56 22.4
Saving Account 194 77.6
Total 250 100.0

The table 4.8 shows the distribution of types of accounts used by 250 respondents.
Majority of respondents have saving account with 77.6 percent whereas only 22.4
percent of respondents have current account. This study reveals that respondents are
less attracted to current account as it doesn’t provide the interest payment to the
accountholders.
 36

Descriptive Analysis
Table 4. 9: Analysis of Tangibility

Std.
Statements Minimum Maximum Mean Deviation
I feel bank is equipped with good
facilities, spacious building and
well-arranged. 1 5 3.80 1.082
Bank provides adequate supplies
such as bank statements, deposit
and withdrawal slips, and bank
cards when I demands. 1 5 3.92 0.943
I feel bank have pleasant and
sufficient lobby and waiting area
for customers. 1 5 3.85 1.060
Bank provides signage for
instructions and directions for easy
processing to my request. 1 5 3.87 0.971
Bank has enough availability
parking space for my vehicle. 1 5 3.70 1.152
Average Score 1 5 3.83 0.796

The table 4.9 illustrates the satisfaction of respondents with the tangibility service of
their related banks. The average score for all the statements of tangibility is more than
3 which means overall respondents are satisfied with the tangibility service of their
associated banks. It is clear that respondents are more satisfied with bank providing
adequate supplies such as bank statements, deposit and withdrawal slips, and bank
cards when they demand for, with the mean of 3.92 and standard deviation of 0.943
and less satisfied with the fact that the bank has enough availability parking space for
vehicle, with mean of 3.70 and standard deviation of 1.152.
 37

Table 4. 10: Analysis of Reliability

Std.
Statements Minimum Maximum Mean Deviation
I feel bank staff delivers the
service with promptness and as
promised. 1 5 3.89 0.998
I assure bank has maintained an
error-free and up-to-date records
such as bills and statements, etc. 1 5 4.00 0.959
I think the services of the bank are
delivered with accuracy. 1 5 4.04 0.891
I feel secured as bank is physically
monitored with devices such as
CCTV cameras. 1 5 4.14 0.942
My transactions and records are
kept with confidentiality. 1 5 4.23 0.905
Average Score 1 5 4.06 0.777

The table 4.10 illustrates the satisfaction level of customers with the reliability service
of their related banks. The average score for all the statements of reliability is more
than 4 which means overall respondents are highly satisfied with the reliability service
of their associated banks. Similarly, it is clear that customers are more satisfied with
the transactions and records are kept with confidentiality, with the mean of 4.23 and
standard deviation of 0.905 and less satisfied with the fact that the bank staff delivers
the service with promptness and as promised, with mean of 3.89 and standard
deviation of 0.998.
 38

Table 4. 11: Analysis of Responsiveness

Std.
Statements Minimum Maximum Mean Deviation
Bank staffs show willingness to
respond to my needs. 1 5 3.92 0.912
I get quick response to complaints,
if I have any. 1 5 3.84 0.981
Bank serve timely delivery of my
required needs. 1 5 3.90 0.897
Bank staff maintains the
promptness of service delivery
even on peak hours to me. 1 5 3.71 1.032
Bank staff attends my complaints
beyond working hours. 1 5 3.29 1.215
Average Score 1 5 3.73 0.820

The table 4.11 illustrates the satisfaction level of customers with the responsiveness
service dimension of their related banks where they engage for transactional purpose.
The average score for all the statements of responsiveness is more than 3 which
overall respondents are satisfied with the responsiveness service of their associated
banks employees in the delivery of services and timing of response. Likewise, it is
vibrant that customers are more satisfied with the bank staffs show willingness to
respond to their needs, with the mean of 3.92 and standard deviation of 0.912 and less
satisfied with the point that the bank staff attends their complaints beyond working
hours, with mean of 3.29 and standard deviation of 1.215.
 39

Table 4. 12: Analysis of Assurance

Std.
Statements Minimum Maximum Mean Deviation
I am assured that bank staff in the
bank know their jobs well. 1 5 4.01 0.953
I feel the bank staff shows
politeness with the customers. 1 5 3.94 1.028
I am assure that the bank increases
my money’s value. 1 5 3.98 0.969
My complaints are dealt according
to the customer care standards and
regulatory requirements. 1 5 3.92 0.930
I feel safe while doing transaction
in banks as information is kept
secured. 1 5 4.16 0.949
Average Score 1 5 4.00 0.806

The table 4.12 demonstrates the satisfaction level of customers with the assurance
service dimension of their related banks where they employ for transactional purpose.
The average score for all the statements of assurance is exactly 4 which means overall
respondents are satisfied with the assurance service of their associated banks.
Furthermore, it is vibrant that customers are more satisfied with they feel safe while
doing transaction in banks as information is kept secured, with the mean of 4.16 and
standard deviation of 0.949 and less satisfied with the fact that their complaints are
dealt according to the customer care standards and regulatory requirements, with
mean of 3.92 and standard deviation of 0.930.
 40

Table 4. 13: Analysis of Empathy

Std.
Statements Minimum Maximum Mean Deviation
I feel the working environment in
the bank is customer-friendly. 1 5 3.96 0.907
I ensure the bank’s location is
accessible and the staff are
approachable to me. 1 5 4.00 0.946
I feel the bank offers minimal
service charges. 1 5 3.88 0.976
I feel bank provides attention to
each individuals’ need. 1 5 3.92 1.020
I feel bank cares by sending
advisories and information of new
offerings and others. 1 5 3.99 0.889
Average Score 1 5 3.95 0.779

The table 4.13 demonstrates the satisfaction level of customers with the empathy
service presented by employees of their related banks. The average mean for all the
statements of empathy is more than 3 which means overall respondents are satisfied
with the empathy service of their associated banks. Additionally, it is clear that
customers are more satisfied with the bank’s location is accessible and the staff are
approachable, with the mean of 4.00 and standard deviation of 0.946 and less satisfied
with the fact that the bank offers minimal service charges, with mean of 3.88 and
standard deviation of 0.976.
 41

Table 4. 14: Analysis of Customer Satisfaction

Std.
Statements Minimum Maximum Mean Deviation
I am satisfied with the bank well-
arranged structure and availability
of enough parking space near
bank. 1 5 3.73 1.128
I am satisfied with the way the
employees deal with questions and
complaints. 1 5 3.97 0.963
I am satisfied with the customer
friendly environment provided by
the bank. 1 5 3.97 0.961
I am satisfied with the promptness
of the bank’s service delivery. 1 5 3.97 0.967
I am satisfied that bank keeps
transactions and records of
customers in confidential manner. 1 5 4.15 0.906
I am satisfied with the service
offering on deposits and loans of
the bank. 1 5 3.81 1.092
Average Score 1 5 3.93 0.816

The table 4.14 shows the customer satisfaction level of 250 respondents who are
attached with different commercial bank in name of receiving the service quality. The
average mean for all the statements of customer satisfaction is more than 3 which
means overall respondents are satisfied with the service quality of associated banks.
Moreover, it is clear that customers are more satisfied with that the bank keeps
transactions and records of customers in confidential manner, with the mean of 4.15
and standard deviation of 0.906 and less satisfied with the fact that the bank is well-
arranged structure and have availability of enough parking space near bank, with
mean of 3.73 and standard deviation of 1.128.
 42

Independent Sample T test

Table 4. 15: Analysis of Customer Satisfaction on the Basis of Gender

Gender Mean Std. Deviation T value P value

Male 3.93 0.852 -0.168 0.867
Female 3.94 0.783

Table 4.15 depicts the average value of satisfaction across male and female
customers. According to the above data, the mean value of satisfaction for male
customer is 3.93 whereas the mean value of satisfaction for female customers is 3.94.
These data show that female customers seem slightly more satisfied than male
customers.

To compare the mean between male and female customers, independent samples t-test
was performed. The p value came out to be 0.867, which is greater than level of
significance (α= 0.05). So, we can conclude that there is no significant impact between
satisfaction among female and male customers of Nepalese commercial bank i.e. H6 is
not accepted.

One-Way ANOVA
Table 4. 16: Analysis of Customer Satisfaction on the Basis of Age Group

Std. P
Age group Mean Deviation Minimum Maximum F value value
18 -28 years 3.58 0.932 1.0 5.0 17.320 0.000
29-39 years 3.95 0.723 1.7 5.0
40-50 years 4.31 0.383 2.8 4.8
More than 50
years 4.38 0.544 1.5 4.8

The table 4.16 shows the analysis of the level of customer satisfaction on the basis of
age group. The minimum and maximum level of 18-28 years ranged from 1 to 5, with
average of 3.58 and standard deviation of 0.932. Similarly, the minimum and
maximum level of 29-39 years’ ranges from 1.7 to 5, with average of 3.95 and
standard deviation of 0.723. Furthermore, the minimum and maximum level of 40-50
years’ ranges from 2.8 to 4.8, with average of 4.31 and standard deviation of 0.383.
 43

Lastly, the minimum and maximum level of above 50 years’ ranges from 1.5 to 4.8,
with average of 4.38 and standard deviation of 0.544.

Since, p-value =0.000 < level of significance (α) =0.05, we accept H7, i.e. there is
significant impact between age group and level of customer satisfaction. This states
that age of the customer impact in the level of customer satisfaction in Nepalese
commercial banks.

Table 4. 17: Analysis of Customer Satisfaction on the Basis of Education Level

Education Std.
level Mean Deviation Minimum Maximum F value P value
SLC 4.21 0.589 1.3 4.8 6.091 0.001
+2 3.91 0.894 1.0 5.0
Bachelors 3.65 0.889 1.5 4.8
Above Masters 4.09 0.707 1.7 5.0

The table 4.17 shows the analysis of the level of customer satisfaction on the basis of
education level. The minimum and maximum level of SLC ranged from 1.3 to 4.8,
with average of 4.21 and standard deviation of 0.589. Similarly, the minimum and
maximum level of +2 ranges from 1 to 5, with average of 3.91 and standard deviation
of 0.894. Furthermore, the minimum and maximum level of bachelors ranges from 1.5
to 4.8, with average of 3.65 and standard deviation of 0.889. Lastly, the minimum and
maximum level of above masters ranges from 1.7 to 5, with average of 4.09 and
standard deviation of 0.707.

Since, p-value =0.001 < level of significance (α) =0.05, we accept H8, i.e. there is
significant impact between education level and customer satisfaction. This states that
education level of the customer impact in the level of customer satisfaction in
Nepalese commercial banks.
 44

Table 4. 18: Analysis of Customer Satisfaction on the Basis of Income Level

Std.
Income level Mean Deviation Minimum Maximum F value P value
Less than
15000 3.87 0.875 1.0 5.0 3.976 0.009
15000-30000 3.72 0.706 1.7 4.7
30001-45000 4.23 0.639 1.8 5.0
Above 45000 4.00 0.910 1.3 5.0

The table 4.18 shows the analysis of the level of customer satisfaction on the basis of
income level. The minimum and maximum level of income less than 15000 ranged
from 1 to 5, with average of 3.87 and standard deviation of 0.875. Similarly, the
minimum and maximum level of income 15000-30000 ranges from 1.7 to 4.7, with
average of 3.72 and standard deviation of 0.706. Furthermore, the minimum and
maximum level of income 30001-45000 ranges from 1.8 to 5, with average of 4.23
and standard deviation of 0.639. Lastly, the minimum and maximum level of income
above 45000 ranges from 1.3 to 5, with average of 4.00 and standard deviation of
0.910.

Since, p-value =0.009 < level of significance (α) =0.05, we accept H9, i.e. there is
significant impact between income level and customer satisfaction. This shows that
income of the customer impact in the level of customer satisfaction in Nepalese
commercial banks.
Table 4. 19: Analysis of Customer Satisfaction on the Basis of Occupation
Occupation Mean Std. Deviation Minimum Maximum F value P value
Government 4.11 0.777 1.7 4.8 7.646 0.000

Private 3.74 0.746 1.5 5.0

Student 3.53 0.970 1.0 4.8

Self employed 4.09 0.799 1.3 5.0

Unemployed 4.28 0.503 2.3 5.0

 45

The table 4.19 shows the analysis of the level of customer satisfaction on the basis of
occupation. The minimum and maximum level of government job ranged from 1.7 to
4.8, with average of 4.11 and standard deviation of 0.777. Similarly, the minimum
and maximum level of private job ranges from 1.5 to 5, with average of 3.74 and
standard deviation of 0.746. Furthermore, the minimum and maximum level of
students ranges from 1 to 4.8, with average of 3.53 and standard deviation of 0.970.
Besides, the minimum and maximum level of self-employed ranges from 1.3 to 5,
with average of 4.09 and standard deviation of 0.799. Finally, the minimum and
maximum level of unemployed ranges from 2.3 to 5, with average of 4.28 and
standard deviation of 0.503.

Since, p-value =0.000 < level of significance (α) =0.05, we accept H10, i.e. there is
significant impact between occupation and customer satisfaction. This shows that
occupation of the customer impact in the level of customer satisfaction in Nepalese
commercial banks.
 46

Correlation Analysis
Table 4. 20: Correlation Between SERVQUAL Dimensions and Customer Satisfaction

X1 X2 X3 X4 X5 X6
X1 1 .794** .706** .746** .751** .805**
0.000 0.000 0.000 0.000 0.000
X2 1 .747** .845** .833** .813**
0.000 0.000 0.000 0.000
X3 1 .764** .800** .770**
0.000 0.000 0.000
X4 1 .865** .878**
0.000 0.000
X5 1 .860**
0.000
X6 1
** Correlation is significant at the 0.01 level (2-tailed).

The table 4.20 shows the correlation matrix between independent variable and
dependent variables, where, X1 = Tangibility (Independent variable), X2= Reliability
(Independent variable), X3= Responsiveness (Independent variable), X4= Assurance
(Independent variable), X5= Empathy (Dependent Variable) and X6= Customer
Satisfaction (Dependent Variable).

The correlation coefficient between tangibility and customer satisfaction is 0.805,

which means there is positive correlation between tangibility and customer
satisfaction. The corresponding p-value is 0.000, which is less than level of
significance (α) = 0.05, indicate that there is significant relationship between
tangibility and customer satisfaction.

The correlation coefficient between reliability and customer satisfaction is 0.813,

which means there is positive correlation between reliability and customer
satisfaction. The corresponding p-value is 0.000, which is less than level of
significance (α) = 0.05, signifying that there is significant relationship between
reliability and customer satisfaction.
 47

The correlation coefficient between responsiveness and customer satisfaction is 0.770,

which means there is positive correlation between responsiveness and customer
satisfaction. The corresponding p-value is 0.000, which is less than level of
significance (α) = 0.05, indicate that there is significant relationship between
responsiveness and customer satisfaction.

The correlation coefficient between assurance and customer satisfaction is 0.878, which
means there is positive correlation between assurance and customer satisfaction. The
corresponding p-value is 0.000, which is less than level of significance (α) = 0.05,
indicate that there is significant relationship between assurance and customer
satisfaction.

The correlation coefficient between empathy and customer satisfaction is 0.860, which
means there is positive correlation between empathy and customer satisfaction. The
corresponding p-value is 0.000, which is less than level of significance (α) = 0.05,
indicate that there is significant relationship between empathy and customer
satisfaction.

Regression Analysis
Table 4. 21: Regression Analysis of Variables

Beta T-value P value VIF

(Constant) -0.053 -0.455 0.649

Tangibility 0.268 5.884 0.000 3.031

Reliability -0.019 -0.328 0.743 4.848

Responsiveness 0.070 1.559 0.120 3.105

Assurance 0.424 7.257 0.000 5.108

Empathy 0.275 4.426 0.000 5.387

R Square 0.841

F Value 258.847

P value 0.000
 48

Coefficient analysis in Table 4.21 shows the impact between customer satisfaction
(dependent variable) and each of the five-independent variable. According to
significant value, tangibility, assurance and empathy has a significant impact with
customer satisfaction.

The regression coefficient of tangibility is 0.268 which indicates that tangibility has
moderate positive impact on customer satisfaction. The corresponding p-value is
0.000, which is less than level of significance (α) = 0.05, indicate that there is
significant impact between tangibility and customer satisfaction i.e. H1 is accepted.

The regression coefficient of reliability is -0.019 which indicates that reliability has
negative impact on customer satisfaction. The corresponding p-value is 0.743, which is
more than level of significance (α) = 0.05, signifying that there is no significant impact
between reliability and customer satisfaction i.e. H2 is not accepted.

The regression coefficient of responsiveness is 0.070 which indicates that

responsiveness has less positive impact on customer satisfaction. The corresponding p-
value is 0.120, which is more than level of significance (α) = 0.05, indicate that there is
no significant impact between responsiveness and customer satisfaction i.e. H3 is not
accepted.

Regression coefficient of assurance is 0.424 which indicates that assurance has high
positive impact on customer satisfaction. The corresponding p-value is 0.000, which
is less than level of significance (α) = 0.05, indicate that there is significant impact
between assurance and customer satisfaction i.e. H4 is accepted.

Regression coefficient of empathy is 0.275 which indicates that assurance has positive
impact on customer satisfaction. The corresponding p-value is 0.000, which is less than
level of significance (α) = 0.05, indicate that there is significant impact between
empathy and customer satisfaction i.e. H5 is accepted.

Moreover, R-square is 84.1 percent which states that the independent variables
explain dependent variable by 84.1 percent. It consists many other factors as well that
influence the dependent variable. This regression coefficient explains 84.1 percent of
the dependent variable. Also, F value and P value are 258.847 and 0.000 which is less
 49

than the level of significance (α) 0.05 which states that this regression analysis is
acceptable. Also, the VIF between the data of tangibility, reliability, responsiveness,
assurance and empathy is less than 10 which suggests that there is less multi
collinearity among the independent variables taken into consideration.

Summary of Hypothesis

Once data and the impact of independent variables and dependent variable have been
analyzed, the final results of hypothesis testing are determined. They are summarized
and shown in Table 4.22.

Table 4. 22: Summary of the Results of Hypothesis Testing

Hypothesis P value Remarks

H1: There is significant impact between tangibility
and customer satisfaction. 0.000 Accepted
H2: There is significant impact between reliability
and customer satisfaction. 0.743 Not accepted
H3: There is significant impact between
responsiveness and customer satisfaction. 0.120 Not accepted
H4: There is significant impact between assurance
and customer satisfaction. 0.000 Accepted
H5: There is significant impact between empathy and
customer satisfaction. 0.000 Accepted
H6: There is significant impact between gender and
customer satisfaction. 0.867 Not accepted
H7: There is significant impact between age group
and customer satisfaction. 0.000 Accepted
H8: There is significant impact between education
level and customer satisfaction. 0.001 Accepted
H9: There is significant impact between income level
and customer satisfaction. 0.009 Accepted
H10: There is significant impact between occupation
and customer satisfaction. 0.000 Accepted
 50

CHAPTER V

SUMMARY AND CONCLUSION

Summary of Major Findings

The main purpose of this study was to know the impact of SERVQUAL dimensions
i.e. tangibility, reliability, responsiveness, assurance and empathy in customer
satisfaction of Nepalese commercial banks. The study investigated the relationship
between the SERVQUAL dimensions and customer satisfaction. For this purpose, a
quantitative research is taken into consideration. This study is based on primary
sources of data and data is collected through questionnaire. The data are used to
extract the information form the bank customer regarding the service quality by the
related banks in this competitive era.

For the quantitative analysis of data, 250 respondents were taken into consideration
consisting equal percentage of data were collected on the basis of gender. The
independent sample t- test analysis showed that there is no significant impact between
gender and customer satisfaction. The highest 43.6 percent of respondent from 18 –
28 age group and the lowest 15.6 percent from 50 year or above age group were
collected in this study. The one-way ANOVA analysis showed that there is significant
impact between age group and customer satisfaction.

The research showed that there are 18.4 percent respondents who have completed
SLC as the lowest whereas 32 percent who have completed Bachelors having highest
percentage on basis of their education level. It was found that there is significant
impact between education level and customer satisfaction. Similarly, the income level
of around 42 percent was less than 15000 and 15.6 percent have income level of
above 45000 as the highest and lowest percentage respectively. It was found that level
of customer satisfaction differ as per the income level since the impact between these
two variables were significant. Likewise, the highest respondent of 24 percent were
from private job while the lowest of 17.6 percent were holding public job. From one-
way ANOVA analysis, it was revealed that there is significant impact between
occupation and customer satisfaction.
 51

The study also includes the descriptive analysis where the average score of tangibility
is 3.83, on reliability is 4.06, on responsiveness is 3.73, on assurance is 4.00 and on
empathy is 3.95. Also, the average score of level of customer satisfaction is 3.93,
which means customer are satisfied with the service quality offered by the associated
commercial banks of Nepal.

The independent constructs of SERVQUAL dimensions were taken to examine its

relationship with the dependent variables i.e. level of customer satisfaction. The
correlation coefficient relationship of all SERVQUAL dimensions i.e. tangibility,
reliability, responsiveness, assurance and empathy with the level of customer
satisfaction is significant as the P- value is less than 0.05. Hence, all the independent
variables are highly correlated with the dependent variable where coefficient ranges
from 0.770 to 0.878. It can be concluded that service quality offered by commercial
banks effects on the level of customer satisfaction.

The regression analysis states that tangibility, assurance and empathy are the
dimensions that have significant impact with the level of customer satisfaction with p-
value of 0.000. Other two independent SERVQUAL dimensions, reliability (with p-
value of 0.743) and responsiveness (with p-value of 0.120) have no significant impact
with the level of customer satisfaction. This research revealed that tangibility,
assurance and empathy directly impact on customer satisfaction whereas reliability
and responsiveness has not much impact on the level of customer satisfaction.

Moreover, the result showed that if independent variable i.e. tangibility,

responsiveness, assurance and empathy are increased by 1 unit then the level of
dependent variable i.e. customer satisfaction is also increased except reliability
variable as the beta value of reliability is negative. Further, VIF is an alternative
collinearity measure and large value indicate a strong relationship between predictor
variables. The VIF less than 10 is acceptable, so that there is no concern of the multi
collinearity in this study as all VIF scores is less than 10. Also, R-square is 84.1
percent which states that the independent variables explain dependent variable by 84.1
percent. It consists many other factors as well that influence the dependent variable.
This regression coefficient explains 84.1 percent of the dependent variable.
 52

Conclusion

The central idea of this study was to measure the service quality in commercial
banking industry of Nepal. This study highlighted the impact of SERVQUAL in the
light of five dimensions of SERVQUAL and customer satisfaction. The core purpose
of the study was to determine the impact of the service quality and to measure the
relationship of these dimensions with customer satisfaction. A SERVQUAL scale was
used with 25 statements of service quality and 6 statements of customer satisfaction.
To meet the objective, structured questionnaire was used to collect data and statistical
tools like SPSS was used to analyze the data.

The result showed that the customers of banks are satisfied by the service quality
offered by the banks as bank keeps transactions and records of customers in
confidential manner. The tangibility, assurance and empathy have significant impact
on the level of customer satisfaction. This is clarified that customer are satisfied with
tangible variables in terms of physical facilities, equipment and parking space
availability. Customers can evaluate bank facilities, design, sufficiency and vision
equipment in the bank. It also revealed that customer’s complaints are dealt according
to the customer care standards and in mean time it discovered that bank provides
attention to each individuals’ need. Further, it concluded that the customers prefer to
get bank services face-to-face.

This study examined the moderating effect of demographic variables between

SERVQUAL dimensions and customer satisfaction. The result from the quantitative
session reveals that the there is no any impact of gender with the level of satisfaction
among customers of Nepalese commercial bank while age group, income level,
education level and occupation have significant impact with level of customer
satisfaction. It showed that the satisfaction level of customer differs as they are from
different age group having varies occupation. At nutshell, tangibility, assurance, and
empathy are the dimensions that impacts the level of satisfaction of customer in
Nepalese commercial banks.

To support this study, Al-Azzam (2015) indicates that tangibility encompasses a

positive influence on customer satisfaction. This can be explicated by customer
significance of tangible variables in terms of physical facilities, equipment and
 53

parking space for vehicles. Furthermore, the findings showed that there is a significant
relationship between empathy and customer satisfaction, where customers value more
to get bank services face-to-face. Also, customer satisfaction can be achieved by
offering personalized, flexible and adjustable services to suit the needs of customers.

Salleh, Abdullah, Nawi, and Muhammad (2019) indicated the relationship between
assurance and empathy are very significance on customer satisfaction while
reliability, responsiveness and tangibility are not significance on customer
satisfaction. Here only the difference is caused by the tangibility dimension as it
creates the differentiation in the result. Tangibility was found to be not significant as
there is changing trend and respondents did not treat tangibles as an important
measurement anymore due to availability of self-service terminals. But in Nepalese
context, though there is increment in the service delivery, there is no availability of
such self-services as of other countries that’s why Nepalese customer prefer to have
the well structure building with availability of parking space where they can have
easy access so as to save time.

Karim and Chowdhury (2014) studied the combination of tangibility, reliability,

responsiveness, assurance and empathy together have significant effect on customer
satisfaction. Therefore, service quality has positive effect on customer satisfaction.
These two variables should work hand in hand to ensure success and survival of the
private sector banks in Bangladesh. In contrast, this paper exhibited that there is
significant impact of SERVQUAL dimensions except reliability and responsiveness
with customer satisfaction. Reliability is about the accuracy and timeliness in the
service provided and responsiveness is the timely reaction towards the customers'
needs. It also, showed that reliability and responsiveness has relationship but no
significant impact on customer satisfaction. Bank service delivery with accuracy, and
bank staff providing quick response to complaints beyond working hours is the need
in providing quality service, but not a must.

However; regression analysis findings contradict many studies where reliability is

most preferred dimension. However, this finding coincides with other studies
confirming the order of priority that tangibility, assurance and empathy strongly
correlates customer satisfaction (Ajmal, Khan, & Fatima, 2018). This study showed
that customer satisfaction based on service quality dimensions such as tangibility,
 54

empathy and assurance having positive and significant impact. It was found that
reliability and responsiveness do not have significant impact on customer satisfaction.

Service quality is antecedent of customer satisfaction. This study found the significant
impact between tangibility, assurance and empathy but did not find significant impact
between reliability and responsiveness dimensions on customer satisfaction. A
reasonable explanation to this could be due to customers’ expectations themselves.
Customers’ expectations had been influenced by their knowledge about general
standards of banking practices. Tangibility, assurance and empathy are strong and have
more explaining power of customer satisfaction in Nepalese commercial banks.

Recommendations

The finding from this research states there are significance impact between tangibility,
assurance and empathy on customer satisfaction while there is no significance impact
between reliability and responsiveness on customer satisfaction. Based on the
conclusions of the research findings, there are some recommendations that become
the implications of the research findings.

 Bank staffs should show the willingness to respond:

Bank staffs should show the willingness to respond to the needs of the customers and
should serve timely delivery of the required needs. Also, they should maintain the
promptness of service delivery even on peak hours and should respond the
complaints beyond working hours, as far as possible by adopting the auto mailing
system for the customer response. Hence, these supported to have the significant
impact of responsiveness and reliability in Nepalese commercial banks.

 Banks should satisfy the customers:

Mainly satisfied customers are the assets of bank as they not only create profits but
also invites new customers for the bank. Satisfied customers can convince three more
customers for the bank. Hence word of mouth is a very robust medium of
advertisement than any other media. Identify and modify the premium service quality
that enhances the customer satisfaction in banking sector of Nepal. A win-win service
 55

quality strategy must be implemented by the banks through providing value to the
customer and customer remains satisfied with the bank.

 Banks should enhance the long term relationship with customers:

To improve level of satisfaction banks should focus on tangibility, empathy and

assurance whereas level of responsiveness and reliability need to be maintained. To
enhance the long term relationship with the customer it is important for the banks to
focus on assurance, responsiveness, tangibility and empathy, additionally banks need
to sustain the reliability.

 Banks must have unified SERVQUAL dimensions as a core of the strategy:

Although the SERVQUAL dimensions (i.e. tangibles, reliability, responsiveness,

assurance and empathy) are considered very preliminary predictor of the customer
satisfaction, but still have a strong impact on the customer satisfaction so these factors
must be unified as a core of the strategy that is directing at enhancing customer
satisfaction. Banks all do same in their customer services, products feature and
relationship management etc. These banks must think rearrange some competitive
ways where they represent themselves in a distinctive way. Adapting the services as
per desires and demands of customer must be the emphasis of banks. Banks should
make their strategy giving importance to the future along with the present time.

 Banks should ensure service excellence by conducting a training program:

Since the employee–customer relationship is considered as highly interactive in

nature, the banking sector of Nepal should ensure service excellence by conducting a
training program for its employees. This employee skill and service culture program
may assure the highest level of customer satisfaction, specifically with regard to front-
line officers. In addition, the training program should also focus on employee’s
interpersonal communication skills and customer care so that they understand the
need of personalized services. Service failure will be promptly recognized and
recovered. Hence, delivery of the promised service will be fulfilled, which in turn will
result in greater customer satisfaction in the Nepalese commercial banks.
 56

 Bank’s manager must know the quality of banking services:

Besides, this study is important to permit bank managers to better understand

customer satisfaction of the quality of banking services and the way to enhance their
satisfaction with respect to aspects of quality of service. Because of the increasing
competition in the banking, customer service is a vital part of bank managers who
have to rethink the way to improve customer satisfaction on service quality. Actually,
this study will contribute the benefit to the banks in order to improve the service
quality thus can enhance the customer satisfaction on the Nepalese commercial banks.
Besides that, the bank manager also will know the needs and wants that demands by
the customers in order to improve the services offered.

Scope of the study

For the further research, other development banks and finance company can be made
as a sample in order to identify the level of satisfaction on customers. Besides that, the
present research just represents a small sample size of the respondents and data. Next,
the questionnaires and surveys should be distributed on a big sample in order to get
results that are more accurate. The change factors and apply advanced model could
also be considered for future study in order to enhance the generalization of the
findings. Furthermore, the researchers should consider other determinants that can
affect the customer satisfaction such as market orientation and innovation orientation.
Moreover; other variables can be included in further assessing moderating variable
which may include knowledge management, customer trust, customer involvement,
profitability and market share to measure the level of customer satisfaction.
 57

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 63

ANNEXES

“Impact of SERVQUAL dimensions on customer satisfaction in Nepalese

Commercial Banks”

I, Asmita Shrestha, an MBA student of Ace Institute of Management, am conducting

a survey on “Impact of SERVQUAL dimensions on customer satisfaction in
Nepalese Commercial Bank”, as a part of my Graduate Research Project (Thesis) to
fulfill the course requirement of MBA, Pokhara University. I expect your valuable
participation and cooperation by answering this questionnaire. I assure you that the
information and responses that you have provided in this questionnaire will be kept
highly confidential and will be used only for academic purpose.

General Information:

Please tick on √ for each criteria group.

A) Gender
1) Male
2) Female

B) Age group
1) 18 -28 years
2) 29-39 years
3) 40-50 years
4) More than 50 years

C) Education level
1) SLC
2) +2
3) Bachelors
4) Above Masters
 64

D) Monthly Income level

1) Less than 15000
2) 15000-30000
3) 30001-45000
4) Above 45000

E) Occupation
1) Government
2) Private
3) Student
4) Self employed
5) Unemployed

Q1. How many years have you used your account?

1) Below 5 years
2) 5-10 years
3) 11 -13 years
4) Above 14 years

Q2. What is the frequency of using the banks’ service?

1) Daily
2) Weekly
3) Monthly
4) Yearly

Q3. Which type of account do you have in the bank?

1) Current Account
2) Saving Account

Q4. On the basis of your information based on the service quality provided by the
current bank where you associated, please put (√) for your level of agreement in
each criterion shown below.
 65

Strongly Strongly
4.1 Tangibility Disagree(2) Neutral(3) Agree(4)
Disagree(1) Agree(5)
1) I feel bank is
equipped with
good facilities,
spacious building
and well-arranged.
2) Bank provides
adequate supplies
such as bank
statements,
deposit and
withdrawal slips,
and bank cards
when I demands.
3) I feel bank
have pleasant and
sufficient lobby
and waiting area
for customers.
4) Bank provides
signage for
instructions and
directions for easy
processing to my
request.
5) Bank has
enough
availability
parking space for
my vehicle.
 66

Strongly Agree Strongly

4.2 Reliability Disagree(2) Neutral(3)
Disagree(1) (4) Agree(5)
1) I feel bank staff
delivers the service
with promptness
and as promised.
2) I assure bank has
maintained an error-
free and up-to-date
records such as bills
and statements, etc.
3) I think the
services of the bank
are delivered with
accuracy.
4) I feel secured as
bank is physically
monitored with
devices such as
CCTV cameras.
5) My transactions
and records are kept
with confidentiality.
 67

4.3 Strongly Disagree(2) Neutral(3) Agree(4) Strongly

Responsiveness Disagree(1) Agree(5)
1) Bank staffs
show willingness
to respond to my
needs.
2) I get quick
response to
complaints, if I
have any.
3) Bank serve
timely delivery of
my required
needs.
4) Bank staff
maintains the
promptness of
service delivery
even on peak
hours to me.
5) Bank staff
attends my
complaints
beyond working
hours.
 68

Strongly Strongly
4.4 Assurance Disagree(2) Neutral(3) Agree(4)
Disagree(1) Agree(5)
1) The customers
are assured that
the staff in the
bank know their
jobs well.
2) The bank staff
shows politeness
with the
customers.
3) The bank staff
ensure that
choosing this bank
will provide them
money’s worth.
4) Assurance that
customer
complaints will be
dealt according to
the customer care
standards.
5) The bank
assures the
customers that the
services and
offerings provided
strictly follows the
regulatory
requirements and
standards.
 69

Strongly Strongly
4.5 Empathy Disagree(2) Neutral(3) Agree(4)
Disagree(1) Agree(5)
1) I feel the
working
environment in
the bank is
customer-friendly.
2) I ensure the
bank’s location is
accessible and the
staff are
approachable to
me.
3) I feel the bank
offers minimal
service charges.
4) I feel bank
provides attention
to each
individuals’ need.
5) I feel bank
cares by sending
advisories and
information of
new offerings and
others.
 70

4.6 Customer Strongly Strongly

Disagree(2) Neutral(3) Agree(4)
Satisfaction Disagree(1) Agree(5)
1) I am satisfied
with the bank
well-arranged
structure and
availability of
enough parking
space near bank.
2) I am satisfied
with the way the
employees deal
with questions and
complaints.
3) I am satisfied
with the customer
friendly
environment
provided by the
bank.
4) I am satisfied
with the
promptness of the
bank’s service
delivery.
5) I am satisfied
that bank keeps
transactions and
records of
customers in
confidential
manner.
 71

6) I am satisfied
with the service
offering on
deposits and loans
of the bank.

Thank you