Journal of Transnational Management

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A structural compendium on service quality and

customer satisfaction: A survey of banks in India

Rajasekhara Mouly Potluri, Srinivas Rao Angati & M. Srinivasa Narayana

To cite this article: Rajasekhara Mouly Potluri, Srinivas Rao Angati & M. Srinivasa Narayana
(2016) A structural compendium on service quality and customer satisfaction: A survey of
banks in India, Journal of Transnational Management, 21:1, 12-28

To link to this article: http://dx.doi.org/10.1080/15475778.2016.1120612

Published online: 12 Feb 2016.

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 JOURNAL OF TRANSNATIONAL MANAGEMENT
2016, VOL. 21, NO. 1, 12–28
http://dx.doi.org/10.1080/15475778.2016.1120612

A structural compendium on service quality and customer

satisfaction: A survey of banks in India
Rajasekhara Mouly Potluria, Srinivas Rao Angatib, and M. Srinivasa Narayanac
a
Nimra Institute of Science & Technology, Ibrahimpatnam, Andhra Pradesh, India; bKrishna University,
Machilipatnam, Andhra Pradesh, India; cNarasaraopeta Engineering College, Yalamanda, Andhra
Pradesh, India

ABSTRACT ARTICLE HISTORY

The core aim of the research is to measure and analyze the Received January 2015
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quality of services offered by the top three public- and private- Revised July 2015;
sector banks in India and to attempt to know how bank services Accepted September 2015
quality affects customer satisfaction. By administering both KEYWORDS
questionnaires and personal interviews, researchers garnered BANKQUAL; customer
the opinions of a total of 600 respondents with BANKQUAL satisfaction; India; service
statement. The authors applied Cronbach’s alpha to test quality
reliability and the selected hypotheses have been proven with
Chi-square tests and t-tests. All the public-sector banks chosen
for the study lead in the satisfaction index over the private-
sector banks by demonstrating differences in the dimensions of
credibility, influence, and geographic spread. The research is
most precious to diverse stakeholders of the Indian banking
industry, particularly to banks who want to know about their
existing service quality for further improvement. For the first
time, the researchers introduced the comprehensive BANKQ-
UAL statement to test out the quality of bank services in India.

Introduction
The Indian banking sector is an indisputable engine for sustaining the coun-
try’s growth agenda and the lifeline of the nation and its populace. Since its
inception, banking in India has propelled the economy in all vital sectors
and ushered in a new dawn of evolution. This crucial core sector has success-
fully translated and transformed the hopes and aspirations of the population
of more than one billion into reality in all aspects of their life. In this process,
it crossed many difficult terrains, moved forward by leaps and bounds, and
suffered the indignities of foreign rule and the pangs of partition. At present,
the Indian banking industry is one of the most highly competitive, largest, and
most advanced industries, confidently competing with banks from the con-
temporary developed world. In the present day’s intense competition, persist-
ent increases in service quality are an emblematic strategy to all companies
that aim to generate an expected level of profits, confidently differentiating

CONTACT Rajasekhara Mouly Potluri prmouly@yahoo.co.in Department of Management Studies, Nimra

Institute of Science & Technology, Nimra Nagar, Jupudi, Ibrahimpatnam 521 456, Andhra Pradesh, India.
© 2016 Taylor & Francis
 JOURNAL OF TRANSNATIONAL MANAGEMENT 13

themselves from other firms. But in reality, the majority of commercial banks
in India have introduced similar kinds of services and prices.
In this situation, any bank can flawlessly differentiate its service through
better quality, which proffers absolute benefits like competitive edge,
enhanced efficiency, customer satisfaction, improved customer retention,
decreased operating costs, and increased profitability and financial perfor-
mance. To win the heart of zillions of customers, irrespective of the method
employed, the prime concern manifested only through ceaseless improvement
of service quality with careful analysis of existing services. Jamal and Naser
(2002) said that service excellence is a multifaceted theory; it has diverse
meaning to different parts of the public (Bennington & Cummane, 1998).
Grönroos (1984) said that service quality is just as vital as the desirability
of a service or product.
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Many extensive research studies on banking service excellence and

customer contentment have been carried out through SERVQUAL statements
by different academicians from India and other Asian countries (i.e., Kiran &
Sharma, 2013). As more and more banks, including resourceful foreign banks,
are in the competitive fray and exceeding customer expectations, it is impera-
tive to every bank to persistently measure service quality to identify quality
gaps for improvement. In this situation, the researchers attempted to take
up this empirical study with a comprehensive BANKQUAL statement just
after to test the reliability by using Cronbach’s alpha and expert opinion.

Literature review
Service quality and customer satisfaction
Many marketing academicians, scholars, and corporate professionals have
defined service quality. For instance, Clow (1993) describes the same as
an organization’s life-giving blood. Service quality typically refers to a kind
of assessment similar to attitude, and customers judge a company’s superi-
ority or excellence; it can be defined as evaluation by customers about the
service delivery process in general (Hellier, Geurse, Carr, & Rickard, 2003;
Parasuraman, Zeithaml, & Berry, 1985). Grönroos (1984) initiated the
service quality concept and defined the concept as the perception of consu-
mers toward a certain service, and he divided it into technical quality and
functional quality. Service quality is simply a compilation of service features
as viewed and selected by customers and determined by observation of
customers who use the service.
Parasuraman, Zeithaml, and Berry (1988) defined apparent service quality
as a universal conclusion, or approach, concerning the supremacy of service,
whereas Lee and Yang (2012) said that service quality is the distinction
between customers’ expectations and their opinion on the service received.
 14 R. M. POTLURI ET AL.

Different views are expressed by different academicians and researchers on

service quality, for example, Swartz and Brown (1989) said that “what” the
service delivers is assessed following presentation and “how” the service is
delivered is evaluated during delivery. Blending both works mentioned
above led to the emergence of the European perception of service quality,
encompassing three facets: technical, functional, and image. Services are
exceptionally and frequently assessed at the moment of service delivery; Klaus
(1985) defined it as the precise sum value professed in the service delivery that
is anticipated by the customer. Thus, businesses are required to concentrate
on enhancing customers’ perception and service delivery process. Bearden,
Malhotra, and Uscategui (1998) said that the service process is benefits in
two ways by improving its quality: (1) Businesses would be a focus for new
customers and (2) they would keep maximum obtainable customers.
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Total customer satisfaction is the buzzword and philosophy of corporate

circles around the world in the new millennium. The concept of customer
satisfaction has acknowledged the concentration of practitioners and academi-
cians around the world for the past four to five decades, and many researchers
attempted to define the term customer satisfaction in general as well as a trans-
actional process. Customer satisfaction occupies a vital place in firms marketing
thought and practice, and there is no exception for service firms. In a related
definition, Juran (1991) said that customer satisfaction is the outcome attained
as offering characteristics act in response to customers’ needs and wants.
Bolton and Drew (1991a) defined customer satisfaction as an opinion on a
definite service encounter, whereas Oliver (1981) viewed it as an expressive
response that manipulates outlook as well as detailed utilization. According
to Hansemark and Albinsson (2004), contentment is by and large customer
feelings toward a service giver, or a poignant response to customers’ antici-
pation and service received by the customer concerning the realization of
their needs and wants. Schiffman and Kanuk (2005) said that customers
whose experience lowers their expectations are dissatisfied and those whose
experience exceeded their expectation are satisfied. Mittal and Kamakura
(2001) expressed a similar opinion on the concept, saying clearly defined
needs and wants of customers will give greater clarity in purchasing exact pro-
ducts and services (prospective acquisition) and the satisfied customers will
communicate this to their relatives and friends. Crucially, Parasuraman and
Berry (1991) said that unlike quality, satisfaction is the result of product or
service usage experience of the respective customers.
In recent years, both customers and banks have concentrated on and given
paramount importance to satisfaction. Frenetic efforts are being made by
banks to proffer superior-quality products and services, and customers also
expect equal value for their money without compromising on excellent
products and services (Strategic Direction, 2007). When we judge customers’
feelings against their anticipation, it is simply called satisfaction level. Most
 JOURNAL OF TRANSNATIONAL MANAGEMENT 15

definitions support this idea of customer satisfaction as a response to an

evaluation process, although others have viewed consumer satisfaction as an
outline concept (Giese & Cote, 2000); an accomplishment reaction (Oliver,
1997); emotional reaction (Halstead, Hartman, & Schmidt, 1994); by and large
an appraisal (Fornell, 1992); and a psychosomatic status (Howard & Sheth,
1969). Zeithaml and Bitner (2003) reiterated that customers view services as
deliverables of satisfaction with its application through occurrence.
Narrowly, Wirtz, Mattila, and Tan (2000) said that normally price, product/
service quality, and image of the brand or company influences satisfaction of
any class of consumers. Kotler and Armstrong (2014) clearly defined the
concept of customer satisfaction as the degree to which a product’s features
match with a customer’s expectations. In this work, researchers treated cus-
tomer satisfaction as the result achieved by absolute delivery of performance
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with ideal service features to satisfy customers’ needs.

Relationship between service quality and customer satisfaction

Extensive discussions are ongoing among academicians and researchers
concerning the liaison between service quality and satisfaction. Stafford,
Stafford, and Wells (1998) realized that both service quality and customer sat-
isfaction are diverse but connected, while Shekarchizadeh and Hon-Tat (2011)
asserted that customer satisfaction is a forerunner to service quality. Spreng,
McKenzie, and Olshavsky (1996) said that satisfaction has a significant effect
on product or service familiarity among customers and Cronin and Taylor
(1992) said that there is an undeviating affiliation between contentment
and visible service quality, and satisfaction establishes a powerful persuading
effect on buying decisions when compared to service quality.
Researchers like Parasuraman, Zeithaml, and Berry (1994) and Teas (1993)
stressed the pandemonium stage in studying the selected topics like customer
satisfaction and service quality and the linkage between these two. Several acade-
micians, such as Carman (1990), Cronin and Taylor (1992), Parasuraman et al.
(1988), and Parasuraman et al. (1994) generally accepted that service quality is
an outcome of assessment or a comprehensive value appraisal, whereas customer
satisfaction is a particular transactional measurement. Bolton and Drew (1991b)
disagreed, saying that the quality of a service is subsequent to customer satisfac-
tion. Finally, both service quality and customer satisfaction are qualifications of
purchase intention, and when compared to service quality, customer satisfaction
exercises a powerful influence on buying decisions of any class of consumers.

Bank service quality and customer satisfaction

The universal conception has been that service quality is intimately coupled
with customer satisfaction and bank management. Service quality has been
 16 R. M. POTLURI ET AL.

and remains at the forefront of bank management’s attention (Appelbaum,

Kim, & Yu, 2005) as well as a crux in the services marketing literature (Lassar,
Manolos, & Winsor, 2000). Assessing bank service quality is the most
common research topic among academicians and researchers in different
parts of the world (i.e., Brahmbhatt, 2015). In particular, Angur, Nataraajan,
and John (1999) studied the introduction of different service quality measures
in the retail banking industry in India and established that all measures are
not essential to all customers in measuring the bank’s performance.
Bahia and Nantel (2000) had taken up a similar kind of study in Canada and
highlighted loopholes in the SERVQUAL approach. They proposed a compre-
hensive Bank Service Quality approach, which consists of 31 items classified
across six dimensions: effectiveness and assurance, access, price, tangibles,
range of services offered, and accuracy and reliability. Notable research by
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Huseyin, Salime, and Katircioglu (2005) emphasized that competent knowl-

edge on banking service features with dedicated delivery of such services prof-
fers a competitive position to any bank in the present day’s cut-throat
competitive banking industry. Karatepe, Yavas, and Babakus (2005) stressed
that customers who have a positive attitude toward their bank service quality
generally have a significant level of contentment, and Al-Hawari and Ward
(2006) hypothesized that only through the optimistic e-service quality
measurement points can banks get significant advantages.
Along with the above, Hossain and Leo (2009) said that banks have to take
precautionary measures in persistent delivery of services as expected by cus-
tomers in view of the fact that it is vital to the success of any bank, and Bei and
Chiao (2006) established that apparent service quality assessed by Taiwanese
bank customers decided their loyalty and satisfaction toward their banks.
After cautious and meticulous review of existing research and combining
the studies of Parasuraman et al. (1985), Zeithaml, Parasuraman, and Berry
(1990), Westbrook and Peterson (1998), and Grönroos (2000), researchers
proffered two kinds of BANKQUAL statements to higher officials of different
banks. The first statement consists of 10 dimensions with 42 constructs, and
the more comprehensive second statement consists of 15 dimensions with 60
constructs. Finally, based on the advice of a majority of bank officials, the
researchers selected the second statement, which is all inclusive in nature,
to measure bank service quality and customer satisfaction.
Beerli, Martin, and Quintana (2004) said that banking customer satisfaction
is an assessment of banks’ performance in gratifying customer needs com-
pared to their expectations. In recent times, the banking industry in every part
of the globe in general and India in particular has been focusing on delivering
maximum lifetime value to their customers by showing keen interest in
improving the quality of their services rather than focusing on cost reduction.
At the same time, some of the quality parameters like price, convenience, tan-
gibility, and reliability have been seen as very important for bank customers.
 JOURNAL OF TRANSNATIONAL MANAGEMENT 17

Levesque and McDougall (1996) said that competitive interest rates and cor-
dial relations between customers and bank employees were the crucial deter-
minants of customer satisfaction in the retail banking sector.
Devlin (2001) highlighted that customers recognize extremely modest vari-
ation in retail banking services offered by different banks, and at the same
time any new introduction is swiftly matched by competitors with much
improvement. Jamal and Naser (2003) asserted that the relationship between
customers and bank employees is the main feature of a bank’s service quality,
which is linked with customer satisfaction. Gilbert, Veloutsou, Goode, and
Moutinho (2004) said that customers who are delighted with the quality of
service offered a favorable opinion as they experienced a higher-quality
service. Arasli, Turan Katrircioglu, and Mehtap (2005) articulated that in
the Greek Cypriot banking industry, reliability is the crucial quality facet that
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had the greatest impact on customer satisfaction, whereas it is not a consider-

able quality element in the studies of Chaniotakis and Lymperopoulos (2009).
Mengi (2009) identified that responsiveness and assurance were crucial factors
for customer satisfaction. At the same time, Kumar, Mani, Mahalingam, and
Vanjikovan (2010) stated that assurance, empathy, and tangibles were the impor-
tant factors. From another point of view, Ahmed et al. (2010) recognized that
empathy was negatively related to customer satisfaction. Mohammad and Alha-
madani (2011) identified that tangibles, reliability, responsiveness, assurance, and
empathy had a significant influence on customer satisfaction and also concluded
that service quality was an important antecedent of customer satisfaction.
Lo, Osman, Ramayah, and Rahim (2010) identified that empathy and
assurance had the maximum influence on customer satisfaction in the
Malaysian retail banking industry. Yee, Yeung, and Cheng (2010) reiterated
that service quality has a constructive impact on customer satisfaction. Abu
Muammar (2005), through his research, proved a strong statistical relation
between customer satisfaction and the services offered by banks with an
expected level of quality and concluded that only satisfied customers are loyal
and continue with those banks as reliable customers. Last, researchers con-
cluded and accepted that delivery of high service quality is an obligation or
an imperative for attaining customer satisfaction and is a prerequisite for a
number of desirable behavioral outcomes that lead to elevated performance
in retail banking (Ting, 2004; Yavas, Bilgin, & Shemwell, 1997).

Profile of the Indian banking industry

The Indian banking industry originated in 1786 with the establishment of the
General Bank of India, and this was followed by the Bank of Hindustan, which
was closed in due course. The government of India established three presi-
dency banks in India. The first of the three was the Bank of Bengal (1809),
the other two presidency banks were the Bank of Bombay (1840) and the Bank
 18 R. M. POTLURI ET AL.

of Madras (1843). These three presidency banks were then merged into the
Imperial Bank of India under the Imperial Bank of India Act of 1920 and
is now known as the State Bank of India (SBI). According to a KPMG-CII
report, the Indian banking industry will be the fifth largest in the world by
2020 and the third largest by 2025 (Shine.com, 2015).
Astonishingly, banks in India have opened 77.3 million accounts under
the Pradhan Mantri Jan Dhan Yojana through November 19, 2014, according
to Snehlata Shrivastava, additional secretary in the Ministry of Finance,
Government of India. Out of that, public-sector banks have opened 62.1
million accounts, with an account balance of U.S. $802.64 million (India
Brand Equity Foundation, 2015). The banking industry in India has success-
fully managed and resisted universal recession with its strong foundation in
all facets of bank management and close supervision from the country’s
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central bank and government. Nationalization of banks is the major milestone

in Indian banking sector and was done in three phases.
In the first phase, the erstwhile Imperial Bank of India became the SBI with
an act in 1955, along with its seven subsidiary banks in 1959. In the second
phase, the sensational decision was made by then–Prime Minister Indira
Gandhi to nationalize 14 major commercial banks in 1969. And in the third
phase, another six commercial banks were nationalized by the Central
Government in 1980. With all these bold moves, there are presently 27 pub-
lic-sector banks including the SBI and its 5 associates, 19 nationalized banks,
20 private-sector banks, and 43 foreign banks from 26 countries operating in
India as of December 2014 (Scheduled Commercial Banks in India, 2015).

Research method
The core purpose of this research is to explore issues affecting bank service
quality among the selected banks in the study and also to know the percep-
tions of customers on their contentment levels. The research approach
primarily consists of both questionnaires and personal interviews with the
customers of top three commercial banks in the capital region of the southern
state of Andhra Pradesh in India. The self-administered questionnaire was
first designed in the English language and then translated into the local
vernacular language, Telugu.
Due to the distinctiveness of the study, which focused on the capital
region of Andhra Pradesh, the researchers garnered the required data
for the survey through a well-structured questionnaire. Out of 27 total
public-sector banks and 19 private-sector banks, researchers have chosen
the top three banks for the study in terms of their overall assets and mar-
ket capitalization. These are the SBI, Bank of Baroda, and Punjab National
Bank in the public sector and HDFC Bank, ICICI Bank, and Axis Bank in
the private sector.
 JOURNAL OF TRANSNATIONAL MANAGEMENT 19

The sample of 100 customers of each bank was selected for the study by
applying both random and convenience sampling techniques. The research-
ers, without any prejudice involved, collected opinions of respective bank
customers who visited the bank during business hours from Monday to Satur-
day in the second two-week period of March 2015. A well-trained team of
MBA students, as part of their assignment, performed this work with the
utmost care and diligence. Uniquely, the researchers extensively involved in
the meticulous literature review had to choose between SERVQUAL (5) or
more comprehensive BANKQUAL (15) service dimensions to assess the cho-
sen topic for the study with a 5-point Likert scale where 1 ¼ strongly disagree,
2 ¼ disagree, 3 ¼ neutral, 4 ¼ agree, and 5 ¼ strongly agree. Finally, research-
ers garnered the opinions of respondents on overall customer satisfaction with
a separate question: “By and large, how satisfied are you with the bank?”
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Finally, the reliability of the proposed and selected BANKQUAL statement

was tested by using Cronbach’s alpha, and expert opinion was used for vali-
dation of the scale. Based on the literature review and discussion with higher
officials of the banking sector, the following hypotheses were selected. Based
on the sampled data, the first hypothesis was proved with a Chi-square test,
the second and third were proved with a t-test for independent samples,
and the reliability of fourth or final hypothesis was checked with Cronbach’s
alpha.
Hypothesis 1: There is a strong association between service quality and customer
satisfaction in the banking industry.
Hypothesis 2: There is a considerable difference among public- and private-sector
banks in service quality.
Hypothesis 3: There is a significant difference between private- and public-sector
banks in levels of customer satisfaction.
Hypothesis 4: BANKQUAL is a reliable measure of service quality in the banking
sector.

Results
The data gathered in this study provide a demographic profile of the respon-
dents along with their opinions on service quality and satisfaction of public-
and private-sector banks. Table 1 highlights the demographic profile of
the sample chosen for the study. The researchers selected the following demo-
graphic features with diverse options in all categories with regard to age,
gender, education, and occupation.
The researchers applied a comprehensive 15-dimension BANKQUAL
statement, which consists of a total of 60 quality constructs, to check the ser-
vice quality of the selected Indian banks—SBI, Bank of Baroda, and Punjab
National Bank from the public sector and HDFC Bank Ltd., ICICI Bank
Ltd., and Axis Bank Ltd. from the private sector. Associated with reliability,
 20 R. M. POTLURI ET AL.

Table 1. Demographic profile of sample (percentage).

Public-sector banks Private-sector banks
Demographic feature Category SBI BOB PNB HDFC ICICI AXIS
Age 20s 18 12 14 19 20 23
30s 29 36 38 41 39 42
40s 36 41 39 31 36 29
50s 10 08 05 06 04 04
60s and older 07 03 04 03 01 02
Gender Male 68 78 76 88 86 85
Female 32 22 24 12 14 15
Education Below 10th 18 14 17 06 04 03
Intermediate 23 19 22 08 09 07
Graduation 44 49 51 64 58 54
Post-graduation 15 18 10 22 29 36
Occupation Farmers 22 18 21 03 02 04
Students 14 11 14 11 16 19
Housewives 19 09 06 08 11 09
Private employees 26 32 33 39 36 41
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Government employees 09 24 18 18 15 09
Self-employed 10 06 08 21 20 18
Note. SBI ¼ State Bank of India; BOB ¼ Bank of Baroda; PNB ¼ Punjab National Bank; HDFC ¼ HDFC Bank Ltd.;
ICICI ¼ ICICI Bank Ltd.; AXIS ¼ ICICI Bank Ltd.

private-sector banks have received a slightly favorable attitude, with 75.75%

and 77.50% for SBI and ICICI, respectively. Regarding responsiveness,
assurance, and empathy, again all private-sector banks are far in advance
with 20% to 30% when compared to the public-sector banks selected for
the study.
Connected with tangibles, private-sector banks have taken unique care in
designing their bank branches and introducing a dress code to enhance the
physical appearance of their service personnel and banks. The same positive
opinion was expressed by customers of the banks selected for the study.
Astonishingly, Indian bank customers expressed their discontent over the
competence of their respective banks’ staff, with around 40% of public-sector
and between 55% and 60% of private-sector banks. Public-sector banks are
in far in advance with a percentage of over 80% when compared to priv-
ate-sector banks regarding the quality dimension of credibility; even the
Reserve Bank of India is closely monitoring its entire bank and its activity
in India (Table 2).
Connected with accessibility, approachability, and ease of contact, custo-
mers of private-sector banks acknowledged reach for the services of private
sector banks in using all possible channels is very high when compared to
public sector banks. Regarding communication, both classes of banks have
failed to satisfy clientele because of poor interactive communication, lack
of explanation of service and its associated costs, troubled problem solving,
as well as trade-offs which are not up to the mark in the Indian banking
industry. Regarding efforts to understand customer needs, around 65%
of customers of private-sector banks and nearly 36% of customers of
 JOURNAL OF TRANSNATIONAL MANAGEMENT 21

Table 2. Customers’ opinion on service quality and customer satisfaction of top three public-
and private-sector banks in india (percentage).
Selected banks
Public-sector banks Private-sector banks
Quality dimension SBI BOB PNB HDFC ICICI AXIS
1. Reliability 75.75 74.00 75.00 77.25 77.50 75.75
2. Responsiveness 44.75 45.25 47.50 75.50 76.50 75.00
3. Assurance 43.50 44.50 46.00 60.75 61.00 59.25
4. Empathy 33.25 34.75 36.75 61.75 60.75 59.75
5. Tangibles 69.00 72.00 73.25 84.25 88.50 87.25
6. Competence 40.75 40.50 43.75 56.75 58.50 57.25
7. Credibility 87.75 80.50 81.50 60.75 59.75 58.75
8. Accessibility 56.75 57.00 58.75 67.50 67.25 65.75
9. Communication 38.00 39.25 40.50 29.75 28.75 28.50
10. Understanding 35.50 36.00 37.25 64.50 66.25 64.75
11. Consulting 28.50 29.25 30.00 43.75 43.75 43.50
12. Price 45.75 48.50 49.25 44.50 44.25 43.25
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13. Offering 57.00 56.75 57.00 67.50 68.50 67.00

14. Influence 88.75 72.50 72.75 71.50 72.75 71.00
15. Geographics 81.50 62.75 62.75 66.25 66.75 60.75
Final question: By and large, 81 78 80 74 75 72
how satisfied are you with
your bank? (%)
Note. SBI ¼ State Bank of India; BOB ¼ Bank of Baroda; PNB ¼ Punjab National Bank; HDFC ¼ HDFC Bank Ltd.;
ICICI ¼ ICICI Bank Ltd.; AXIS ¼ ICICI Bank Ltd.

public-sector banks are totally satisfied and happy with the services
delivered.
Linked to the parameter of Consulting & Price, Indian banking customers
are totally dissatisfied. Connected with offerings, almost all banks in both
public and private sectors have been providing similar kinds of offerings to
attract different communities in society. There is no absolute difference
among these based on the classification of banks. Related to clout, which is
the ability of a bank to provide the best offerings at the lowest price, SBI—
undisputedly the largest bank in the Indian banking industry—occupied an
apex position among the selected banks in the study with a percentage of
88.75%.
Finally, 81.50% of SBI customers expressed their pleasure on the geo-
graphics of the bank throughout the country as well as in foreign countries.
As a final point, the researchers raised a question regarding customers’
overall satisfaction levels with respective banks. Among the public-sector
banks, 81% of SBI customers, 80% of Punjab National Bank customers,
and 78% of Bank of Baroda customers expressed their satisfaction with
the services received and interest charged. In the private sector, 75% custo-
mers of ICICI Bank said the same; HDFC Bank stood in the next place with
just 1% difference.
H1: There is a strong association between service quality and customer satisfaction
in banking industry.
 22 R. M. POTLURI ET AL.

Table 3. Contingency table for H1.

Service quality
Customer satisfaction Strongly agree Agree Neutral Disagree Strongly disagree Total
Highly satisfied 54 32 7 15 17 125
Satisfied 26 12 6 12 10 66
Neutral 9 2 4 4 5 24
Dissatisfied 21 8 5 6 8 48
Highly dissatisfied 7 4 6 4 6 27
Total 117 58 28 41 46 290

Table 4 Chi-square test.

Value df Asymp. sig. (2-sided)
Pearson’s Chi-square test 31.12 16 0.0129892a
No. of valid cases 290
a
Significant at 5% level.
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To test the above-mentioned hypothesis, the researchers resorted to

Chi-square testing for association, and the calculation is shown in Table 3
and Table 4.
The p value was <.05; therefore, we can reject the null hypothesis and there
is no association between awareness of service quality and customer satisfac-
tion in banks. We may say that service quality is associated with customer
satisfaction in the banking industry.
H2: There is a considerable difference among public- and private-sector banks in
service quality.

To test this hypothesis, a t-test for independent samples was used. The
results of the test are presented in Table 5.
As the p value was <.05 for the t-statistic, we can reject the null hypothesis
and conclude that there is significant difference in service quality of public-
and private-sector banks.
H3: There is a significant difference between private- and public-sector banks in
levels of customer satisfaction (Table 6).

As the p value of the test statistic was <.05, we may reject the null hypoth-
esis and conclude that there is a significant difference between private- and
public-sector banks in customer satisfaction levels.
H4: BANKQUAL is a reliable measure of service quality in the banking sector.

Table 5. Independent samples t-test.

t-Test for equality of means
T df Sig. (2-Tailed)
Equal variance assumed 2.34 288 0.0199
Equal variance not assumed 2.23 288 0.0265
 JOURNAL OF TRANSNATIONAL MANAGEMENT 23

Table 6. Independent samples t-test.

t-Test for equality of means
t df Sig. (2-Tailed)
Equal variance assumed 1.98 288 0.0486
Equal variance not assumed 1.96 288 0.0502

As the Cronbach’s alpha for BANKQUAL was found to be 0.81 for the
sampled respondents, we may consider BANKQUAL as a reasonably reliable
measure of service quality in banking sector.

Analysis and discussion on selected hypotheses for the study

As the primary objective of the present paper is to develop a reliable measure
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of service quality, which is believed to be associated with customer satisfaction

in the banking industry, an attempt is made to introduce a more robust alter-
native to SERVQUAL, namely BANKQUAL. The reliability of BANKQUAL
is verified by Cronbach’s alpha and found to be significant. The fundamental
hypothesis for the study is that there is a strong association between service
quality and customer satisfaction in banks and was found to be valid by using
BANKQUAL. Two other hypotheses for the study—that there is a significant
difference between private- and public-sector banks in terms of service quality
and average levels of customer satisfaction—are also validated by the sampled
data.

Managerial implications
This research assertively offers invaluable information to all the stakeholders
of the banking industry in India. First, the government of India has to take
additional precautionary measures to instill more concrete measures to
enhance reliability, responsiveness, assurance, empathy, credibility, and com-
petence of all classes of banks through its controlling authority, i.e., the
Reserve Bank of India, to better serve to the country’s populace. Even respect-
ive commercial banks both in public and private sectors have an opportunity
to design novel strategies, plans, programs, budgets, and policies based on the
opinions expressed by their customers on different parameters. A price-sensi-
tive market like India needs heavy concentration on this parameter, which
needs further focus from all the commercial banks on best banking products
and services and competitive pricing structures, while the public sector banks
need to improve tangible facilities to provide a more pleasant and convenient
banking experience.
The Indian banking industry has to develop seamless training and develop-
ment efforts to develop a multi-skill approach, interactive marketing, familiar-
ization with the latest technology, and understanding of different customer
 24 R. M. POTLURI ET AL.

needs among their employees in general and frontline staff in particular. Even
though all kinds of banks in India are under the close supervision of the
Reserve Bank of India, private-sector banks’ credibility is in question because
of the recent closure of some banks in that sector, which needs to introduce a
tougher control mechanism. As mentioned in the comprehensive BANKQ-
UAL statement with the opinions of their customers, both public- and priv-
ate-sector banks could assess each and every quality parameter for further
stringent action, which is imperative in a fiercely competitive Indian banking
sector. It is high time to use a more comprehensive measure like the BANKQ-
UAL statement in the Indian banking industry to measure the quality of offer-
ings by banks.
Banking service quality is strongly associated with customer satisfaction
levels, and in the growing competitive environment, it is mandatory for all
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banks to focus on improving service quality. Public-sector banks are lagging

in terms of quality and customer satisfaction levels compared to foreign
and private-sector banks in India. The Reserve Bank of India and the govern-
ment of India in general and the respective banks in particular need to take
some policy measures to bridge the gap identified by this research.

Conclusion
This research reveals factual and comprehensive information about service
quality and satisfaction levels of Indian banking customers, which is lucrative
to all stakeholders of the industry. Issues coupled with time and cost in this
study call for further research, which should pursue a significantly large
sample of diverse classes of customers with the relative significance of bank
quality dimensions. The entire banking industry should engage in this kind
of frequent assessment of their services for further improvement. This
research has the following limitations: (1) The research was confined only
to measuring service quality and customer satisfaction of the top three banks
from public and private sectors. (2) This research covers only the capital
region of the Andhra Pradesh state in India. (3) The research used both ran-
dom and convenience sampling, and customers who did not visit their
respective bank branches in the defined period did not get an opportunity
to disclose their opinion through this survey.

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