COMPARISON BETWEEN INDIAN BANK &

HDFC BANK ON SERVQUAL MODEL

SUBMITTED TO PROF. S.PANDA

IMIS

SUBMITTED BY
Parashar saha dm o91
Arijit roy dm 005

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 CONTENTS: page

Introduction.
Models of banking service
quality.
Tools for evaluation of
service quality
Conceptual framework
Hypothesis to testing
Research methodology.
Sample selection
Finding & suggestions

Acknowledgement

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Without the help form the MANAGER OF HDFC BANK &
INDIAN BANK our project would have not been completed
successfully

We are also thankful to the customers of both HDFC BANK &

INDIAN BANK who co-operated with us honestly.

The really cool thing is that we took the data from both the
bank’s customer & matched it whatever we have got during
taking their interview of 2-3 minutes we noticed the
reflextion of words into the answer of the questionarie.

Project Goal - compare the service quality between

INDIAN BANK & HDFC BANK

Project Development Process:

• Study of servqual
• Design Concepts
• response through questionire
• analysis & Interpretation

Brief Description of Banking System in India

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There are basically four categories of banks such as Public
Sector Banks, Private Banks, Foreign Banks and Cooperative
Banks operating in India that are regulated by Reserve Bank of
India (RBI). Besides, there are some subsidiaries of public
sector and cooperative banks that are operating in the
different parts of the country. The major Public Sector banks
are State Bank of India, Allahabad Bank, Andhra Bank,Indian
Bank, UCO Bank and United Bank of India. The Private Banks
include ICICI Bank, HDFC Bank and UTI Bank. The important
foreign banks that are operating in India are HSBC, Citibank
and ABN-AMRO Bank.

Today Banks are providing various services apart from the

traditional Banking services.In this competitive scenario it is
very vital for a Bank to provide excellent quality services to
remain competitive and hold a advantage over others.

In our study we are going to have a comparative analysis

between HDFC and INDIAN Bank based on SERVQUAL Model.So
it is better to know about them and their services.

HDFC BANK

HDFC Bank was incorporated in August 1994, and, currently

has an nationwide network of 1412 Branches and 3275 ATM's
in
528 Indian towns and cities. The Housing Development Finance
Corporation Limited (HDFC) was amongst the first to receive
an 'in principle' approval from the Reserve Bank of India (RBI)
to set up a bank in the private sector, as part of the RBI's
liberalisation of the Indian Banking Industry in 1994. The bank
was incorporated in August 1994 in the name of 'HDFC Bank
Limited', with its registered office in Mumbai, India. HDFC Bank
commenced operations as a Scheduled Commercial Bank in
January 1995.
Their single-minded focus on product quality and service
excellence has helped us garner the appreciation of both
national and international organizations.
The merger of Centurion Bank of Punjab Ltd (CBoP) with HDFC
Bank
Limited became effective on May 23, 2008 as per the order of
Reserve
Bank of India (RBI), with April 1, 2008 as the appointed date

FINANCIAL RESULTS:

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Profit & Loss Account: Quarter ended December 31, 2008 The
total income for the bank for the quarter ended December 31,
2008 grew by 58.8% over the corresponding quarter ended
December 31, 2007 to Rs. 5,407.9 crores. Net revenues (net
interest income plus other income) were Rs. 2,918.6 crores
for the quarter ended December 31, 2008, an increase of
37.9% over Rs. 2,116.5 crores for the correspondingquarter
of the previous year. Interest earned (net of loan origination
costs and amortization of premia on investments held in the
Held to Maturity (HTM) category) increased from Rs. 2,726.9
crores in the quarter ended December 31, 2007 to Rs. 4,468.5
crores in the quarter ended December
31, 2008, up by 63.9%. Net interest income (interest earned
less interest
expended) for the quarter ended December 31, 2008 increased
by 37.7% to Rs. 1,979.3 crores, driven by average asset
growth of 44.1% and a net interest margin (NIM) of around
4.3% for the quarter ended December 31,
2008.

The products offered by HDFC BANK are :

Accounts & Deposits

Savings Accounts

Current Accounts

Fixed Deposits

Demat Account

Safe Deposit Lockers

Loans

Personal Loans

Home Loans

Two Wheeler Loans

Cards

Credit Cards

Debit Cards

Prepaid Cards

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Investments & Insurance

Forex Services

Payment Services

Access Your Bank

Models of Banking Service Quality

Based on the models of organizational effectiveness and

institutional
effectiveness, seven models of Banking Service quality have
been proposed in the literature to illustrate the different
concepts that can be used to deepen understanding of
Banking Service quality and develop management strategies
Each of these models deals with the different key areas for
evaluation of quality.These are :

1.Goal and specification model

2.Resource – input model

3.Process model

4.Satisfaction model

5.Legitimacymodel

6.Absence of problem model

7.Organizational learning model

Out of the seven education models, ‘Satisfaction Model’ has

been considered here to evaluate the Banking quality because
variation of satisfaction level among the Customers can be
accounted for.

According to this model, Banking quality is defined as the

satisfaction of Customers of an Banking institution for its
survival. The Banking quality should be determined by the
extent to which the performance of an Banking institution can
satisfy the needs and expectations of its Customers. Banking
Service quality primarily depends on the expectations and
perceptions of Customers. Therefore, it is difficult for all
institutes to achieve it and satisfy the needs of all the
Customers. Furthermore, the objective evaluation of quality

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achievement is often technically difficult and conceptually
controversial.

Therefore, satisfactions of Customers are frequently used

instead of
some objective indicators as the critical element to assess
quality in Banking institution.

For the present research, two important indicators of

Banking Service quality we have taken are low income and High
income Customers.

SERVQUAL (and its modified versions), a multiple-item survey

instrument, that supports qualitative analysis with
quantitative information are still popular among researchers
as far as assessment of service quality is concerned and have
been applied to different service sectors.The instrument uses
five core criteria (dimensions) consisting of twenty-two pairs
of components evaluated in a seven point Likert-type scale
under which customers decide in evaluating the service
quality. The first twenty-two items are designed to measure
customer’s pre-purchase expectations for a particular service
and the other twenty-two items are provided to measure
perceived level (perceptions) after delivery of a service.

Tools for Evaluation of Service Quality

Quantitative measurement of service quality is extremely

difficult because of the involvement of human behavioral
aspects and the absence of precise numerical data. Some of
the approaches of service quality measurement are outlined as
follows:

1. Statistical analysis

2. Artificial Neural Networks (ANN)

3. Machine learning techniques such as genetic algorithms and

fuzzy
logic

4. Rough Set

5. Analytical Hierarchy Process

6. Quality Function Deployment (QFD)

7. Data Envelopment Analysis (DEA)

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8. Taguchi Method

9. Decision trees

10.Data visualization

Artificial Neural Networks (ANN) has been a very effective

approach employed by many studies for the evaluation of
‘Satisfaction Model’ because it is frequently applied in the
literature for modeling the human decision-making process
since it is considered to be the brain metaphor of human
judgments. It is a potential technique to predict an output,
classify a given inputs into a groups (pattern recognition) and
incorporates the criteria.It can also exploit and represent the
nonlinear relationship between the customer satisfaction and
their perception of the service that are the key elements for
evaluation of the service such as banking sector.In earlier
research ANN has been applied to evaluate the service quality
considering four performance models (P-E, P-only, E-P and E&P)
for customer satisfaction using their expectations and
perceptions of the service.It was found P-E model will be an
appropriate one in bankig sector.So we have used P-E model in
our study

Usually, four models such as perception minus expectation gap

(P-E gap), expectation minus perception gap (E-P gap), perception-
only (P-only), and expectation and perception (E&P) models are
used to predict service quality. However, performance of
various models in relation to predictive power of service
improvement widely differs depending on various
application.The deviations in obtaining the best model of
service quality are due to the fact that the quality of service
varies from one sector to another. For example, the
components of quality in a fast food restaurant are very
different from those on a railway or a bank or a holiday
resort. Therefore, quality of service is much difficult to
define precisely because service provider generally provides
utility, not objects, as in case of manufacturing sector. The
diverse components of service sector make its quality control
and improvement more difficult to generalize. The service
quality items in the banking sector largely differ that from
the auto-dealer network, financial or transportation sector.
Thus, neural network models, when tested in a different
service sector with different survey items, may indicate
significantly different results.

There are 4 different models available

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 Model-I (P-E gap model): In this network model, the input is
defined using the traditional SERVQUAL-based gap that means
perceptions of customers minus the expectations.This
resulted in twenty-two input nodes, a hidden layer and an
output layer consists of one node representing the overall
evaluation of service quality.

Model-II (P-only model): The use of perception and expectation

gap had raised concern among the researchers due to its low
reliability. It is argued that perceptions of the customer are
more important than the gap between their perceptions and
expectations.

Therefore, a service quality measuring instrument known as

‘SEVPERF’
considering only the perceptions of the customers is
suggested by the researchers.In this model, only customer
perceptions are used as input.

Model-III (E-P gap model): Generally, it is assumed that most

customers enter a service situation with some expectations
.These expectations are formed either by previous experiences
of the same or similar service, or simply expectations
generated by customer independently. So customer usually
undertakes a service experience with some preconceived
expectations and thereafter develops a perception of that
experience.

Hence, service quality could be measured as expectations

minus perceptions or E-P gap. A positive E-P score implies that
customer
expectations are more than the perceptions of the customer
i.e. the
expectations of customers are not met whereas a negative
score in this gap indicates the delighted customer. The values
of gap for the twenty-two items of SERVQUAL can be used as
the input data for this model.

Model-IV (E & P model): Customer expectations are generally

accepted as a part of the service experience but their exact
role in the overall evaluation of service quality is still
controversial.Therefore, the interactions of expectations
and perceptions independently may be considered without a
predefined relationship between them.

In our comparative study between HDFC and INDIAN BANK ,we

have used P-E gap model for the analysis and evaluation of
service quality in banking sector with the input data such as
customer expectations, perceptions and the gaps.

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The Conceptual Framework

To understand the characteristics of service quality in

general and service quality in banking in particular,
discussions on various aspects of the customer satisfaction
in relation to the traditional Banking service quality is
necessary. Widespread literature survey discussed suggests
various authors have pointed out several Banking service
dimensions. The most common dimensions of banking for
evaluation of customer perceived service quality banking from
the literature are Tangibility,Reliability,
Responsiveness,Assurance and Empathy.

The RATER is an instrument that might be used to define and

measure banking service quality and to create useful quality-
assessment tools. It includes all SERVQUAL five dimensions
(Othman, et al., 2001) that consist of 22 questions. Both
models define customer satisfaction as perceived service
quality, which is the gap between expected service and
perception of service actually received.

The RATER may finally provide the following benefits to the

Indian banks:
1. It is the first approach to add and mix the customers’
religious beliefs and cultural values with other quality
dimensions.
2. It provides for multi-faced analysis of customer
satisfaction.
3. It links quality with customers’ satisfaction and service
encounter.
4. It provides information at several levels, already organized
into meaningful groupings.
5. It is a proven approach, which results in usable answers to
meet customers’ needs.
6. It is empirically grounded, systematic and well documented.

Even more Indian bank should learn how to prioritise these

factors according to their cultures, current situations and
the availability of resources.Banks managers can use the
RATER model and its dimensions first to identify the following
issues:

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1. To identify those areas where improvement should be made
and resources can be allocated. For instance, they need to
know the level of quality in their banks and they can
manipulate to make bank-wide improvement in quality
performance. Also they can use benchmarking to compare
their performance and other banks’, which have already
implemented quality program that will help to prioritise the
quality management efforts.

Tangibility : This dimension deal with modern looking

equipments and visual appealing part of banks.

Reliability: This dimension has a direct positive effect on

perceived service quality and customer satisfaction in banking
institutions.Banks must provide error free service and secure
online transactions to make customers feel comfortable.

Responsiveness: Customers expect that the banks must

respond their inquiry promptly.Responsiveness describes how
often an bank
voluntarily provides services that are important to its
customers.Researchers examining the responsiveness of
Banking services have highlighted the importance of perceived
service quality and customer satisfaction.

Assurance; Customer expect that the bank must be secured

and the behaviour of the employees must be encouraging.

Empathy ; individual attention,customized service and

convenient banking hours are very much important in todays
service.

In order to achieve better understanding of service quality in

banking sector, the proposed five service quality dimensions
are conceptualized to illustrate the overall service quality
of the banking in relation to customers’ and providers’
perspective.

Tangibility

Reliability

Responsiveness

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Assurance
Customer
Empathy perspective

Banking
Banking Customer Service
services Satisfaction Quality

Banker’s
perspective

Fig 1.1 The Research Framework

The five dimensions of banking service quality have been

indicated with respect to customer’s and banker’s perspective.
The relationship
between customer satisfaction and the service are also
mentioned in the Figure 1.1. Basically, service quality in
banking can be viewed from both customers’ perspectives and
bankers’ perspective. From the customers’ perspective, service
quality is the perceived quality. From the bankers’ perspective
there are targets and delivered quality. However, bankers are
first required to understand the attributes that are
significant for the customers’ satisfaction to judge the
service quality for enhancing banking service.

Basically, service quality in banking can be viewed from two

perspectives:

• customer perspective

• bank perspective

Customer perspective

From the perspective of the customer, the service quality

differentiates sought quality and perceived quality. Sought
quality is the level of quality customers explicitly or
implicitly demand and expect from service providers. The
sought quality (customer expectations) is
created due to several factors – primarily, the expectations
are formed during a previous personal experience of a
customer with a service, and the customer is influenced by the
experiences of the other users and by the image of an

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organisation. Perceived quality means the overall impression a
customer has and experiences about the level of quality
after service realisation. The potential difference between
the sought quality and the perceived quality gives the service
provider an opportunity to measure customer satisfaction
based on formulating the precise and actual criteria
according to which the customers are assessing the services.

Providers perspective

From the provider perspective, there are target quality and

delivered quality. The focus of process- or supply-led quality
definition is rather internal than external, and it is defined as
conformance to requirements. It lays emphasis on the
importance of the management and the supply-side quality, and
there is an important role of the process in determining
the quality of outcome (Ghobadian, 1994). Achieving the
quality of conformance between the planned (target) quality
level and the real quality delivered to customers depends on
the service quality management system in an organisation.

Hypothesis to Test

With the stiff competitions in banking industry, it is apparent

that the service providers need to provide customers with high
standard services. To achieve this goal, the bankers are first
required to understand the attributes that are used by
customers to evaluate the service quality. Therefore, the main
purpose of this study is to gain a better understanding of how
each of the dimensons affects service quality in the banking
sector. The following proposition appears to be significant.

1. The dimensions reflecting service quality in banking is

significantly
related to each other.
.
2.. The dimensions significantly determine the customer
satisfaction in banking.

Research Methodology (Survey Design)

The questionnaire consists of three parts.The first part

consists of 2 questions concerning the demographic
information of the respondents such as Age & Income. The
second part consisting of twenty-two questions exploring the
respondent’s perception about the service quality of banking.
The third part consisting of twenty-two questions exploring

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 the respondent’s expectation about the service quality of
bank. We have also taken some suggestions from the
respondents.
These questions have been organised under the proposed
framework based on the SERVQUAL model.

Earlier studies on evaluation of service quality of banks had

used dimensions of services quality as Tangibility, Reliability,
Responsiveness, Assurance and Empathy.So in our study we
have used the same five dimensions.

Sample Selection

We have collected the data’s from the customers by visiting

two retail branch of HDFC AND INDIAN BANK in
Bhubaneswar.The collection of data was done during
April,2009. Non-Probabilistic sampling method has been
employed in this study. The most common type of non-
probabilistic sampling method which is applied in this study is
‘convenience sampling’ through which we had selected the
sample members who can provide required information and
available to participate in the study.

We have taken the response of 15 customers from each bank.

HDFC BANK

4
MEAN

3 PERCEIVED

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
QUESTIONS

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 INDIAN BANK

4
MEAN

3 PERCEIVED

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
QUESTIONS

HDFC BANK

5.6
5.4
5.2
MEAN

5
EXPECTED
4.8
4.6
4.4
4.2
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
QUESTIONS

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 INDIAN BANK

5.4
5.2
5
MEAN

4.8
EXPECTED
4.6
4.4
4.2
4
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
QUESTIONS

SERVQUAL SCORE

DIMENSIONS HDFC INDIAN

RAN RAN
K K
BANK
TAGIBLES (0.42) 2ND (1.38)
1ST

RELIABILITY (0.32) 3RD (0.67)

4TH

RESPONSIVENESS (.45) 1ST (1.02)

2ND
ASSURANCE (.02) 5TH (0.38)
5TH
EMPATHY (0.29) 4TH (0.95)
3RD

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 PERCEIVED

4
MEAN

HDFC
3
INDIAN BANK
2

0
1 2 3 4 5
DIMENSIONS

FINDINGS AND SUGGESTION

1.In HDFC the GAP score of responsiveness is highest so they

should focus on promt service, employees should be willing
to help the customers and say the exact time when the services
will be performed.

2.customer expectations regarding visual appealing of HDFC

is very high.so they should work on that and try to fulfil the
gap.

3.Reliability part is better as compared to indan bank.Still the

gap score is negative.

4.As gap score is minimum so the customers of hdfc bank are

very confidence and feel safe while transacting with the bank.

5.Physical facilities and modern looking equipment are not

sufficient in Indian bank.

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6.As compared to HDFC Indian bank are not able to provide
prompt service to their customers.

7.The present customized service and convenient operating

hours are not sufficient to meet the expectations of the
customers.

8.According to our study HDFC BANK is a better service

provider in all the dimensions.

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