Academic journal article International Journal of Management and Innovation

Service Quality in Retail Banking-A Comparative Study between Public Sector Banks & Private Sector Banks

Academic journal article International Journal of Management and Innovation

Service Quality in Retail Banking-A Comparative Study between Public Sector Banks & Private Sector Banks

Article excerpt


Indian Banking industry is one of the most technologically advanced industries with vast networks of branches empowered by strong banking systems, their wide range of product and effective channel distribution capabilities. However, Regulatory, structural and technological factors are significantly changing in the banking environment throughout the world. One of the most important factors that is affecting the growth of the Indian banking institutions is the liberalization. The financial sector reform in India was designed to infuse greater competitive vitality in the banking system. To achieve this objective, the "Narsimhan Committee" was formed. The Narsimhan Committee report suggested wide ranging reforms for the Indian banking sector in 1992, including the important one to introduce internationally accepted banking practices so as to enable Indian banks to achieve service excellence. The Committee recommended a liberal policy towards the entry norms of private sector banks and foreign banks into the Indian banking sector.

The Interest rate structure has been deregulated to a great extent and banks have been given a great degree of freedom in determining their rate structure for deposits and advances, as well as their other product range. Banking has also become more competitive in respect of branch network. The end result is that market power is getting shifted from banks to their customers. Financial liberalization has led to intense competitive pressures, and retail banks are consequently directing their strategies towards increasing customer satisfaction and loyalty through improved service quality. With such a high potential in the Indian banking industry, all leading banks are looking ahead to establish themselves as the most preferred bank by the customers and this can only happen when they are able to differentiate themselves on the basis of service quality being offered by their competition. Retail Banking has immense opportunities in a growing economy like India. As the growth story further unfolds in India, retail banking is going to emerge a major driver. A.T. Kearney, a global management consulting firm, recently identified India as the second most attractive retail distribution centre of 30 emergent markets.

Concept of Service Quality

Quality services are an elusive concept because of the intangible nature of the service offering and the definition of quality may vary from person to person and from situation to situation. Service quality support a customer centered definition with the reservation that customer expectation are not necessary consistent or predictable.

Hoe Craft (1991) said that service quality in banking implies consistently anticipating and satisfying the needs and expectations of the customer. Hence, service quality is the conformance of service to the customer specifications and expectations. The quality of services therefore depends on the ability of the service to meet the expectation of the customer.

While reserving and managing service quality, unique characteristics of the services are to be kept in mind. The unique characteristics of services identified by various authors since 70's are.

1. Intangibility (Bateson, 1977)

2. Heterogeneity (Booms & Bitner, 1981)

3. Inseparability (Carman & Langeard, 1980)

4. Perishability (Gronroos, 1990)

Dimensions of Services Quality

Persuraman, Zeithmal & Berry (1985) identified ten determinants of service quality that relate to service. These determinants were reliability, responsiveness, competence, access, assurance, courtesy, communication, creditability, security, understanding the customer. At a later stage, Persuman (1988) reduced these service qualities to five dimensions, namely tangibles, reliability, responsiveness, assurance and empathy.

1. Tangibles: This dimension refers to the physical facilities, appearance of personnel or tools or equipments used to provide the service. …

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