Customer Satisfaction

with Service Quality:

An Empirical Study of Public
and Private Sector Banks
Pooja Mengi*

Customer service is an integral part of any facet of banking and it defines the
future of any banking organization. In India, this realm has undergone vast
changes induced by regulatory and competitive forces and the banking industry
has undergone revolutionary changes since 1991. For a service sector like
banking industry, the whole range of activity and generation of income swivels
around the customer. It is necessary to identify the key success factors in the
banking industry, in terms of customer satisfaction keeping in view the increasing
market size and intense competition. This study compares customers
perceptions of service quality of public and private banks of Jammu. The service
quality of both the banks has been measured using SERVQUAL (service quality)
scale. SERVQUAL scale was used to determine different dimensions of service
quality and chi-square analysis was used to understand the impact of SERVPERF
(service performance) dimensions (tangibility, reliability, responsiveness,
assurance and empathy) on customer satisfaction. It was found that customers
of public sector banks are more satisfied with the service quality, than those of
private sector banks.

Introduction
In the first decade of the 18th century, banking in India originated (in 1786) with
The General Bank of India followed by Bank of Hindustan. Both these banks are
now defunct. The oldest bank in subsistence in India is the State Bank of India
(SBI) which was established as The Bank of Bengal Calcutta in June 1806.
By the 1900s, the bank market expanded with the establishment of banks like
Punjab National Bank (PNB) in 1895 in Lahore and Bank of India in 1906 in Mumbai.
Since 1935, the RBI formally took on the responsibility of regulating the Indian
banking sector.
The banking industry in India has undergone revolutionary changes due to
liberalization and globalization measures initiated since 1991. This measure, along
* Faculty Member (Marketing), INC, Jammu 180018, Jammu & Kashmir, I ndia.
E-mail: [email protected]

2009 IUP.
All Rights
Customer
Satisfaction
withReserved.
Service Quality:
An Empirical Study of Public and Private Sector Banks

with the rapid growth in the Indian economy has transformed the banking sector
in India, with strong contribution from government, private and foreign banks.
Deregulation, entry of private players, increased competition, technological blend
and attitudinal transformation among bankers have made banks sensitive to
customers needs and satisfaction.
For a service sector, the whole range of activity and generation of income
swivels around the customer. It is necessary to identify the key success factors
in the banking industry in terms of customer satisfaction, keeping in view the
increasing market size and intense competition. This revelation would help
players in this industry to meet customer expectations. For delivering quality
service, it is vital to have customer orientation as a bank culture. Customer
orientation builds long-term relationships leading to customer satisfaction and
cash flow to the bank.
This paper attempts to understand the dimensions of SERVQUAL, which will
ensure maximum customer satisfaction. This study compares customers of public
sector and private sector banks in terms of their SERVQUAL perceptions. For this
purpose, the study uses the service performance (SERVPERF) scale which was
developed by Cronin and Taylor (1992).

Service Quality Perceptions: Theoretical Framework

Service quality is defined as a global judgment or attitude, relating to the overall
superiority of the service (Parasuraman et al., 1988, p. 16). Service quality is
a focused evaluation that exhibits the customers perception of: reliability,
assurance, responsiveness, empathy and tangibles. Satisfaction is influenced by
perceptions of service quality, product quality and price as well as personal and
situational factors. Figure 1 reflects the relationship between customer perceptions
of quality and customer satisfaction.
Figure 1: Customer Perceptions of Quality and Customer Satisfaction
Reliability
Responsiveness

Service Quality

Assurance

Situational
Factors

Empathy
Tangibles

Product Quality

Price

Customer
Satisfaction

Customer
Loyalty

Personal
Factors

Source: Zeithaml et al. (2008, p. 109)

The IUP Journal of Management Research, Vol. VIII, No. 9, 2009

Service Performance Measures

A SERVQUAL measure designated SERVQUAL was developed by Parasuraman
et al. (1985, 1988 and 1991). This measure states that the customers
assessment of overall SERVQUAL is established by the degree and direction of
the gap between their perceptions and expectations of actual performance
levels. The perceived SERVQUAL can be illustrated as:
Perceived SERVQUAL = Customer Perceptions Customer Expectations
SERVQUAL has been used to measure SERVQUAL in various service settings,
viz., banks, hotels, dental clinic, insurance companies, health care organizations,
telecommunications, etc. The scale has been used extensively in India to measure the
quality of services provided by retail stores (Kaul, 2005), telecommunications companies
(Madhavaiah, 2005), hospitals (Deshpande, 2006), hotels (Sivakumar and Srinivasan,
2003) and fast food restaurants (Jain and Gupta, 2004).
However, the SERVQUAL scale has been criticized for its validity and reliability.
In the empirical work, Cronin and Taylor (1992 and 1994) demonstrated that the
measures of SERVPERF performs better than SERVQUAL. Hence, this study used
SERVPERF in measuring banking service.

Objective
The objective of the study is to identify the dimensions of SERVQUAL that ensures
maximum satisfaction for customers in the banking sector. Accordingly,
this hypothesis is proposed:
Hypothesis: Superior service quality performance in certain dimension(s)
ensures maximum customer satisfaction in banking industry.

Research Methodology
This study is based on a survey conducted in Jammu (Jammu & Kashmir)
in March 2009. Primary as well as secondary data were collected. The theoretical
foundation of the study is based on various secondary sources such as texts on
service quality, articles, quality magazines, article features and published and
non-published papers. For the purpose of the study, a questionnaire was
designed on 5 point Likert scale, where 1 represents highly dissatisfied and 5
represents highly satisfied, and respondents were asked to respond to the
statements in the SERVQUAL scale. Public sector, private sector and foreign
banks operating in Jammu form the universe of the study. Two public sector
banksSBI and PNBand four private sector banksHDFC, ICICI, Axis and J&K
were selected for the study. The study is based on the assumption that all
banks belong to the same category. This categorization was based on the
responses of the customers.
Customer Satisfaction with Service Quality:
An Empirical Study of Public and Private Sector Banks

A 100 questionnaires were distributed, out of which 88 were usable. Forty four
customers belonged to public sector banks and 44 belonged to private sector
banks. The demographic details of the respondents are represented in Table 1.
Chi-square test is used to find a significant difference among bank groups regarding
service performance.

Findings and Analysis

Sample Characteristics
The demographic profile of the respondents is presented in Table 1. Although there
were differences between the two samples of public sector and private sector
bank customers, there were also some similarities.
Table 1: Demographic Profile of the Respondents
Bank Type

Public Sector

Private Sector

(in %)
Overall

Sex
Male

48.4

51.6

72.7

Female

54.2

45.8

27.3

Single

42.9

57.1

15.9

Married

51.4

48.6

84.1

Under 30 years

36.4

63.6

12.5

31-40 years

21.4

78.6

47.7

41-50 years

85.7

14.3

31.8

100.0

0.0

8.0

Graduate

64.4

35.6

67.0

Post Graduate

20.7

79.3

33.0

Student

36.4

63.6

12.5

Service Class

53.6

46.4

63.6

Business Class

33.3

66.7

13.6

Housewife

66.7

33.3

10.3

Dependent

50.0

50.0

22.7

Below Rs. 15,000

22.2

77.8

10.2

Rs. 15,000-25,000

51.0

49.0

58.0

Above Rs. 25,000

75.0

25.0

9.1

Marital Status

Age

51 years above
Qualification

Profession

Monthly Income

10

The IUP Journal of Management Research, Vol. VIII, No. 9, 2009

Measure Validation
The next step of analysis dealt with how well the SERVPERF measures exhibited
reliability when used in banking services of public and private sector in Jammu city.
Individual measures were subjected to a reliability analysis in accordance with
predicted SERVPERF dimensions. Using coefficient alpha (Cronbach, 1951) and on
analysis, all the dimensions reflected acceptable reliability; the alpha values of all
the measures were greater than 0.7 (Table 2), the cutoff recommended by Nunnally
(1978) for the basic research. Hence, the reliability analysis predicted the
trustworthiness of the data obtained from the questionnaires.
Table 2: Cronbachs Coefficient Alphas for SERVPERF Dimensions
Dimension

Cronbachs Alpha
Private Sector Bank

Public Sector Bank

Tangibility

0.73

0.77

Reliability

0.81

0.84

Responsiveness

0.74

0.76

Assurance

0.88

0.83

Empathy

0.84

0.79

SERVPERF Measures
The respondents of public and private sector banks were asked to evaluate the
quality of services provided by the respective banks in which they held accounts
utilizing the overall measures and various SERVPERF scale items. The results are
summarized in Table 3. The individuals of public sector bank sample are highly
satisfied with the bank service in comparison to the individuals of private sector.
The highly rated factors in private bank sample compared to public bank sample
wereEmployees are well-dressed and neat (Mean = 3.64), service promises are
kept (Mean = 4.12), employees are always willing to help customers (Mean = 3.08)
and timely bank statements (Mean = 3.56). The highly rated factors in public bank
sample compared to private bank sample werethe bank statement gives complete
information (Mean = 4), the bank service keeps records accurately (Mean = 4.12),
and the employee knows what your needs are (Mean = 3.96). In particular, there
was an interesting contrast between samples on assurance and empathy
dimensions. For the three statements measuring assurance dimension, public bank
samples evaluated banks services more favorable than the private bank samples.
Similarly, in the empathy dimension of service quality, the public bank sample was
more favorable than the private bank sample. The t-test value (0.63) reveals
that customers of public sector banks are more satisfied with the quality of the
services in comparison to the private sector banks. However, in both the cases,
the level of satisfaction is not on the higher side and the level falls in above average.
The two statements measuring the empathy dimension (t-value: 2.25 and 3.1)
Customer Satisfaction with Service Quality:
An Empirical Study of Public and Private Sector Banks

11

evaluated the SERVQUAL of public sector banks more favorably than the private
sector banks. Correspondingly, there was a noticeable difference in the rating of
the statement employees are well-dressed and neat of tangibles (t-value 3.11)
and the statement the bank service of sending timely bank statement measuring
responsiveness (t-value 2.84) of private and public sector bank services.
Private bank customers rated the respective statements of the two dimensions
higher than the public bank customers.
Table 3: SERVPERF MeasuresResults of the t-test
Mean
Variables

t-value

Private
Sector

Public
Sector

3.60

3.76

0.63

The banks premises is visually appealing

3.72

3.40

1.36

The bank service has up-to-date equipment

3.60

3.76

0.71

Employees are well-dressed and neat

3.64

2.90

3.11

Pamphlets are clear and give complete information

3.36

3.28

0.31

The bank statements gives complete information

3.88

4.00

0.43

The bank service keeps promises

4.12

3.96

0.63

The bank service of handling customer problems

3.32

3.28

0.17

The bank service keeps time

3.08

2.72

1.38

The bank service keeps records accurately

3.84

4.12

1.11

You receive prompt service from the bank

3.24

3.32

0.29

Employees are always willing to help customers

3.08

2.88

0.70

The bank service of sending timely bank statement

3.56

2.68

2.84

Employees are polite

3.28

3.44

0.54

Employees are eager to instill confidence

2.90

3.04

0.31

Employees are courteous

2.96

3.04

0.25

The bank service provides best interest at heart

3.04

3.60

2.25

Employees know what your needs are

3.12

3.96

3.10

Overall
I am satisfied with the service of the bank
Tangibles

Reliability

Responsiveness

Assurance

Empathy

12

The IUP Journal of Management Research, Vol. VIII, No. 9, 2009

Chi-Square Analysis
A chi-square analysis was performed on each sample to determine the impact of
SERVPERF on customer satisfaction with banking services. The results are
summarized in Tables 4 and 5. It is evident from Table 3 that the chi-square
calculated value (43.6) is higher than the table value at 5% level of significance.
Hence, the SERVPERF dimensions have an impact on the satisfaction level of
private banks sample.
Table 4: Impact of SERVPERF on Customer Satisfaction
Responses of Private Banks Sample
Level of
Satisfaction

SERVPERF Dimensions
Tangibility

Reliability

Responsiveness Assurance Empathy Total

High

73

58

25

21

20

197

Medium

46

30

37

35

15

163

12

13

19

15

65

125

100

75

75

50

425

Low
Total

Note: Chi-square calculated value = 43.6, Table value = 15.5 (5% level of significance).

Table 5: Impact of SERVPERF on Customer Satisfaction

Responses of Public Banks Sample
Level of
Satisfaction

SERVPERF Dimensions
Tangibility

Reliability

Responsiveness Assurance Empathy Total

High

57

49

26

28

32

192

Medium

49

34

27

22

13

145

Low

19

17

22

25

88

125

100

75

75

50

425

Total

Note: Chi-square calculated value = 23.2, Table value = 15.5 (5% level of significance).

It can be seen from Table 4 that the SERVPERF dimensions have an impact on
the satisfaction level of a public bank sample, as the computed chi-square value
(23.2) is higher than the table value at 5% level of significance.

Conclusion
In the emerging competitive environment and IT era, with little or no distinction
in the product offerings, it is the quality of service that sets one bank apart from
another. The results of the study indicate that tangibility and reliability provides
maximum satisfaction to customers of private as well as public sector banks.
The banks need to focus on other dimensions of SERVPERF such as responsiveness,
assurance and empathy which plays an important role in service quality. Superior
SERVQUAL performance will ensure maximum customer satisfaction and also help
Customer Satisfaction with Service Quality:
An Empirical Study of Public and Private Sector Banks

13

in attaining customers loyalty. Improved customer satisfaction through SERVQUAL

would result in a positive word-of-mouth and consequently better customer
acquisition and retention.

Limitations and Future Research

The limitation associated with this study is that the sample is taken only from six
banks, i.e., two public sector and four private sector banks. This is done in
consideration of the limited number of private banks available in Jammu city.
The sample size is 100, as there are only two public sector banks (SBI and PNB)
with a major market share and limited private sector banks with minor market
share. Hence, the sample size was 50 each for public sector and private sector
banks. Future research needs to examine a wider sample extending to maximum
number of public and private sector banks.
Second, the time period of this study was during the recovery post recession
phase of the business cycle, where the organizations were focusing on cost
cutting. The performance of the bank services may be different during growth.
Third, this study considered the influence of two factors (tangibles and
intangibles) on customer satisfaction in banks. There might be other situational
factors like advertising, price, repurchase intention and word-of-mouth
recommendation. Subsequent empirical research should look at the impact of these
factors on customer expectations (Zeithaml et al., 1993).
Fourth, the results obtained through the study relate to only those respondents
chosen through convenience sampling, and since the profile of the sample is not
a model of actual market share of different public and private sector banks in
India, this study should be seen as giving a direction for future research and
generalization from this study to a wider population of retail banking industry
should be done with some caution. Also, in order to measure customer satisfaction,
overall satisfaction and SERVQUAL measures have been considered. Service
loyalty as an after effect of satisfaction could be added as an additional variable
for further research.

References
1. Cronbach L J (1951), Coefficient Alpha and the Internal Structure of Tests,
Psychometrika, Vol. 16, No. 3, pp. 297-334.
2. Cronin J J and Taylor S A (1992), Measuring Service Quality: A Reexamination of
Extension, Journal of Marketing, Vol. 56, No. 3, pp. 55-68.
3. Cronin J J and Taylor S A (1994), SERVPERF vs. SERVQUAL: Reconciling
Performance-Based and Perception-Minus-Expectations Measurement of
Service Quality, Journal of Marketing, Vol. 58, No. 1, pp. 125-131.
14

The IUP Journal of Management Research, Vol. VIII, No. 9, 2009

4. Deshpande Priya (2006), Service Quality Perspectives and Satisfaction in Health

Care SystemsA Study of Select Hospitals in Hyderabad, Indian Journal of
Marketing, Vol. 36, No. 4, pp. 3-7.
5. Jain S K and Gupta Garima (2004), Measuring Service Quality: SERVQUAL vs.
SERVPERF Scales, Vikalpa, Vol. 29, No. 2, pp. 25-37.
6. Kaul Subhashini (2005), Measuring Retail Service Quality: Examining
Applicability of International Research Perspectives in India, Working Paper
No. 2005-10-02, October, Indian Institute of Management, Ahmedabad.
7. Madhavaiah C (2005), Service Quality in Telecommunications: A Case Study
of BSNL, Kadapa, Unpublished M.Phil Dissertation Submitted to Annamalai
University, Annamalainagar, Tamil Nadu.
8. Nunnally J C (1978), Psychometric Theory, McGraw-Hill, New York.
9. Parasuraman A, Zeithamal V A and Berry L L (1985), A Conceptual Model of
Service Quality and Its Implications for Future Research, Journal of Marketing,
Vol. 9, Fall, pp. 41-50.
10. Parasuraman A, Zeithamal V A and Berry L L (1988), SERVQUAL: A MultipleItem Scale for Measuring Consumer Perceptions of Service Quality, Journal of
Retailing, Vol. 64, No. 1, pp. 12-40.
11. Parasuraman A, Zeithamal V A and Berry L L (1991), Refinement and
Reassessment of the SERVPERF Scale, Journal of Retailing, Vol. 67, No. 4,
pp. 420-450.
12. Sivakumar C P and Srinivasan P T (2003), A SERVQUAL Model Approach for
Training Hotel Staff to Deliver Service Quality, in Balaji Prasad P (Ed.),
Management Challenges of Service, pp. 231-248, Serials Publications, New Delhi.
13. Zeithamal V A, Berry L L and Parasuraman A (1993), The Nature and
Determinants of Customer Expectations of Service, Journal of the Academy of
Marketing Science, Vol. 21, No. 1, pp. 1-12.
14. Zeithaml V A, Bitner Mary Jo and Gremler Dwayne (2008), Services Marketing,
4th Edition, The McGraw-Hill Companies, New Delhi.

Customer Satisfaction with Service Quality:

An Empirical Study of Public and Private Sector Banks

15

Annexure
Customer Satisfaction Survey Questionnaire
Note: This information will exclusively be used for research purpose and in no case will
be disclosed to anybody.
A. General Information
Customer Name

Bank Name

Bank Type:

Private

Public

Type of Account:

Savings

Salary

Gender:

Male

Female

Marital Status:

Married

Single

Age:

Under 20

21-30 yrs

41-50 yrs

Above 50 yrs

Graduate

Post Graduate

Qualification:

Income (Monthly): Dependent

Below Rs. 15,000

Any Other

31-40 yrs

Rs. 15,000-Rs. 25,000

Above Rs. 25,000

Profession:

Employee

Student

Businessman

House wife

B. Please tick () 5, 4, 3, 2, 1 against the appropriate box where,

5 = highly satisfied; 4 = satisfied; 3 = neither satisfied/nor dissatisfied; 2 = dissatisfied;
1 = highly dissatisfied.
S. No.

16

Questions

1.

Tangibility
Are you satisfied with the premises of the bank?
Is it visually appealing?

2.

Are you satisfied with the technological up-to-date

equipments of the bank?

3.

Are you satisfied with the way employees dress?

4.

Are you satisfied with the pamphlets distributed by the

bank? Are they clear and give complete information?

5.

Are you satisfied with the bank statement?

Is it visually clear?

6.

Reliability
Are you satisfied with the services provided by the
bank as promised?

7.

Are you satisfied by the service of handling customers

service problems?

The IUP Journal of Management Research, Vol. VIII, No. 9, 2009

Annexure (cont.)
S. No.

Questions

8.

Are you satisfied with the way bank informs about the
time when service will be performed?

9.

Are you satisfied with the record maintaining procedure

of your account?

10.

Responsiveness
Are you satisfied with the promptness in providing
service to you?

11.

Are you satisfied with the willingness of employees

to help customers?

12.

Are you satisfied with the bank service of sending timely

bank statement?

13.

Assurance
Are you satisfied with the way employees behave with you?

14.

Are you satisfied with the employees eagerness

of instilling confidence in customers?

15.

Are you satisfied by the employees behavior

of showing consistently courteousness towards you?

16.

Empathy
Are you satisfied by banks service of providing
customers best interest at heart?

17.

Are you satisfied by the bank service of providing

the product that best suits you?

18.

Are you satisfied by the overall service quality

of your bank?

Reference # 02J-2009-09-01-01

Customer Satisfaction with Service Quality:

An Empirical Study of Public and Private Sector Banks

17

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