An Empirical Investigation of Perceptions of Customers About Quality of Services Offered by public and private Sector Banks

Vikas Gautam Research Scholar, ICFAI University Dehradun, Uttrakhand (India)

Abstract: After the implementation of government policies on globalization and liberalization, the consumers have become more critical of the quality of service. Consumers are now very much aware of the alternatives available in relation to services and the provider organizations. Expectations of consumers are rising and the provider organizations should be aware of these expectations. The objective of the present study is to compare and analyze the service quality perceptions of customers about the public sector and private sector banks. The study also seeks to find the relevant dimensions of the SERVQUAL/SERVPERF scale in banking industry in Indian context. A total of 235 respondents completed the field survey, and survey was conducted in the Dehradun city of Uttrakhand state. The primary statistical techniques used in the study are Correlation analysis, Factor analysis and Multiple regression analysis. An attempt has been made here to quantitatively study the levels of the dimensions of service quality and its relation to customer service quality perceptions. Results of overall service quality perceptions show that public sector banks are rated high as compared to private sector banks. Exploratory factor analysis was used and five factors were extracted using the method of principal component analysis. The five factors extracted in case of public sector bank explained 78.34% of the variance; where as five factors extracted in case of private sector bank explained 77.07% of the variance. The correlation analysis results show that all the five dimensions are highly relevant for service quality perceptions in banking sector, as correlation coefficient r values for all the dimensions range from 0.945 to 0.973. Regression analysis with overall service quality perceptions as dependent variable, and five extracted factors as independent variables was run in SPSS 17.0. Regression results show that except tangibility dimension, beta coefficient values for other four dimensions of service quality namely; empathy, reliability, assurance, responsiveness are higher in case of public sector banks. Statistically beta coefficient values for reliability, assurance dimensions are higher in case of public sector banks as compared to private sector banks. Whereas only one dimension tangibility got statistically higher beta coefficient value for private sector banks. The present study was conducted under the null hypothesis that there is no significant difference in the service quality perceptions of public and private sector banks. Results of ttest rejected the null hypothesis, led to the inference that there is significant difference in the service quality perceptions of public and private sector banks. In all present study arrived at a conclusion that customers perceive better quality of service for public sector banks as compared to private sector banks. Keywords: Service quality, Perception, banks, SERVQUAL, SERVPERF, Correlation Analysis, Exploratory Factor Analysis, Regression Analysis

INTRODUCTION
Service organizations in In dia are facing tough competition in the global market because of liberalization and globalization of the Indian economy. Hence, it is helpful for service organi zations to know the customer service quality perceptions in

order to overcome the competi tors and attract and retain the customers. Because of the glo balization and liberalization of Indian economy, Indian service sector has been opened for Mul tinational companies. In order to overcome the competition and to retain the world class service standards, Indian companies

have been forced to adopt qual ity management programs. Nerurkar (2000) analyzed the SERVQUAL dimensions in In dia and concluded that service quality should form the basis for all customer retention strate gies. Services are defined as: the activities, which are involved in producing intangible products
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as education, entertainment, food and lodging, transporta tion, insurance, trade , govern ment, financial, real estate, medical, consultancy, repair and maintenance like occupation. Quality has become a strategic tool for obtaining efficiency in operations and improved busi ness performance (Babakus and Boller, 1992; Garvin, 1983; Phil lips, Chang and Buzzell, 1983). This is true for the services sector too. Several authors have discussed the unique impor tance of quality to service firms and have demonstrated its posi tive relationship with profits, in creased market share, return on investment, customer satisfac tion, and future purchase inten tions (Rust and Oliver, 1994). One obvious conclusion of these studies is that firms with supe rior quality products outperform those marketing inferior quality products. Service quality can be con cisely defined as the personal experience of the customer with the service provider. Service quality is playing an increas ingly important role in the pres ent environment where there is no further scope for the compa nies to differentiate themselves other than the quality of the service provided by them. De livering superior service quality than the competitors is the key for the success of any organiza tion. But, the companies face difficulties in measuring the quality of services offered to the customers. Because unlike mea suring the quality of goods, the measurement of the quality of services offered by the compa nies is difficult due to the three unique features of services viz. intangibility, heterogeneity, and inseparability. Hence the only way of measuring the quality of services offered by the service provider is the measurement of the customers perception of the
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quality of service they are expe riencing from their service pro viders. Quality has been defined differently by various authors. Some prominent definitions in clude conformance to require ments (Crosby, 1990), fitness for use or one that satisfies the customer. According to produc tion philosophy of Japan, qual ity has been defined as zero defects in the firms offerings. Though initial efforts in defin ing and measuring service qual ity emanated largely from the goods sector, a solid foundation for research work in the area was laid down in the mideight ies by Parasuraman, Zeithaml and Berry (1985). They were amongst the earliest researchers to emphatically point out that the concept of quality prevalent in the goods sector is not extend able to the services sector. Being inherently and essentially intan gible, heterogeneous, perishable and entailing simultaneity and inseparability of production and consumption, services require a distinct framework for quality explication and measurement. As against the goods sector where tangible cues exist to en able consumers to evaluate prod uct quality, quality in the service context is explicated in terms of parameters that largely come under the domain of experience and credence properties and are as such difficult to measure and evaluate (Parasuraman, Zeithaml and Berry, 1985). One major contribution of Parasura man, Zeithaml and Berry (1988) was to provide a concise defini tion of service quality. According to these authors service quality means relating the superiority of the service with the global judgement of a person about it and explicated it as involving evaluations of the outcome (i.e., what the customer actually re ceives from service) and process

of service act (i.e., the manner in which service is delivered). In line with the propositions put forward by Gronroos (1984) and Parasuraman, Zeithaml and Berry (1985, 1988) posited and operationalized service quality as a difference between consumer expectations of what they want and their perceptions of what they get. Based on this conceptualization and opera tionalization, they proposed a service quality measurement scale called SERVQUAL. Quality has become a strate gic tool in obtaining efficiency in operations and improved perfor mance in business. This is true for both the goods and services sectors. However, the problem with management of service quality in service firms is that quality is not easily identifiable and measurable due to inher ent characteristics of services which make them different from goods. The service sector is the most important sector contributing largely to the economy. In case of Indian economy, service sec tor is an important component. In postreforms era financial services has got due signifi cance. In the recent past, many foreign and private sector banks had entered in the Indian finan cial market and made it very competitive. For survival in the present competitive financial market maintenance of service quality has become prerequi site. According to Narsimham Committee, 1991 emphasis on efficient and effective service quality has been laid because of pressure from reforms after liberalization and competition from private players in the field of banking. In case of banking services various service products being offered and their interface with the information technol ogy, which includes internet banking, Automated Teller

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machines, electronic delivery channels etc. help the banks to capture the market and be the leader in the market (Cooper and Edgett, 1996). In India plenty of studies have been conducted till now, and many committees have been constituted to study the service quality, like Saraiya Committee (1972), Talwar Com mittee (1975), Goipuria Commit tee (1980). National Institute of Bank Management has con ducted national level survey and found that customers are dissat isfied over delays in the services offered by banks. In the present time a large number of public sector, private sector, and for eign banks are operating in the Indian financial market. Being a regulator of all financial insti tutions, Reserve bank of India ahs made rules and regulations to cater the needs and safeguard the interests of the customers.

Figure 1 Tangibles Reliability Responsiveness Assurance Empathy Expected Service Perceived Service Perceived Service Quality

This model is different from other models as it helps if find ing out more than one aspect of service encounters. Rust and Oliver in 1994 in their research showed that overall service quality perceptions are based on various dimensions of service encounters.

plAN OF REST SECTIONS OF THE STUDy

Next sections of the pres ent study cover model of ser vice quality perception, review of related literature, research gap and purpose of study, mea surement scale of study, objec tives, scope and hypothesis of the study, research methodol ogy, data presentation, analysis, findings, limitations, future av enues, conclusion and few ser vice quality improvement sug gestions.

REVIEW OF lITERATURE
Several studies were conduct ed on the issue of service quality in various countries. Some stud ies were consulted for proper understanding of the concepts discussed in this study. Vari ous models have been developed to determine measure and as sess the determinants of service quality. SERVQUAL is based on the idea of a gap between expec tations of the customers about service quality by service pro vider and their assessment of actual performance of service by service provider. Since Parsura man et al. (1988) developed the SERVQUAL instrument many researchers have used and de veloped the 22item scale to study service quality in different sectors of services industry. The following studies are consulted for the present study: A. Parsuraman, Leonard L. Berry, and Valarie A. Zeithaml, (1988) in their study described

MODEL OF SERVICE QUALITy PERCEPTION

The present study is based on the SERVQUAL/SERVPERF Model suggested by Parsura man, Zeithaml, and Berry (1988), which explains the ser vice quality on the basis of gap between perceived service qual ity and expected service quality.

about development of 22item instrument in the assessment of service quality perceptions of customers in service and re tail firms, which was called as SERVQUAL. This study was revolutionary as it didnt depend on the earlier dimension of goods quality in the manufacturing sector. The initial study based on the focus groups yielded 10 di mensions of service quality that included access, competence, courtesy, credibility, security, tangibles, reliability, respon siveness, communication, and understanding the customer. In concluding remarks, authors proposed that SERVQUAL scale can help a vast range of service and retail firms to assess the customer expectations and per ceptions of service quality as it had a variety of potential appli cations. Johnson, William. C, and Anuchit Sirikit (2002) conducted a study on the landline and mo bile users of the Thai telecom munication industry using the SERVQUAL scale (reliability, responsiveness, assurance, em pathy, and tangibles). The study was conducted with the objec tives of finding whether service quality ratings predict a com petitive advantage among Thai telecommunication firms as indi cated by future customer inten tions and whether SERVQUAL
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reliably assesses service quality perceptions/expectations among customers in the Thai telecom munication industry. G.S.Sureshchandar, Chan drasekharan Rajendran, and R.N.Anantharaman (2003) criti cally examined the service qual ity issues from the customers point of view. In their study con ducted in a developing country, India, authors selected three groups of banks for their study viz. Public sector, Private sector, and foreign banks. Authors in their study found that in terms of the customer perceptions of service quality, the technologi cal factors appear to contribute more in differentiating the three sectors and the peopleoriented factors appear to contribute less in differentiation among three sectors. In terms of performance foreign banks topped among three groups, and performance of public sectors banks is even less than private sector banks. Alka Sharma, Versha Mehta, (2004) found in their empiri cal study in the banking sector that among the public and pri vate sector banks all five dimen sions of the service quality are of equal importance. In terms of score comparison, the scores for the public sector have been higher than the private sector. Gayathri, H, M. C. Vinaya, and K. Lakshmisha (2005) con ducted a pilot study on the in surance companies in India to quantitatively study the levels of the dimensions of service quality and its relation to the level of customer satisfaction. The results showed that LIC was scoring lower in all the five dimensions of service quality. To relate the satisfaction level of customers with the levels of SERVQUAL dimensions, mul tiple regression equations were developed for the four compa nies. The study concluded by saying that the companies have
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to focus on service quality in or der to differentiate themselves and create a competitive advan tage in order to survive the com petition in the market. Halil Nadiri, Kashif Hussain (2005) found in their study that SERVPERF scale maintains its reliability. With the help of exploratory factor analysis re searchers arrived on conclusion that SERVPERF instrument failed to form its five dimen sions reliability, responsive ness, tangibility, assurance, and empathy. Tangibles and intan gibles were the two dimensions which were formed as a result of the study. Mushtaq A Bhat (2005) con cluded that Indian banks fall much below the perceptions of their customers on all the five dimensions of service quality, where as in case of foreign banks, these banks are exceeding the perceptions of their customers on two dimensions of service quality namely; tangibility and reliability. This finding revealed the notion that Indian banks in terms of service quality do not meet the expectations of their customers. In case of foreign banks perceptions and expecta tions of the customers about ser vice quality offered by the banks do not have a big gap. Ndubisi, Nelson Oly, and Chan Kok Wah (2005) conduct ed a study on the Malaysian banking sector. The study con cluded by saying that banks can generate customer satisfaction by exhibiting trustworthy be haviour, commitment to service, communicating information to customers efficiently and accu rately, delivering services in a competent manner, handling potential and manifest conflicts skilfully, and improving overall customer relationship quality.

Najjar, Lotfollah, and Ram R. Bishus (2006) study on the US banking sector using a non difference score of SERVQUAL scale focused on the importance of improving service quality in the banking sector. The study used statistical tools like ANO VA, Factor Analysis, and Re gression to analyze the data. The final results of the ser vice quality analysis showed that reliability and responsive ness were the two most critical dimensions of service quality and they are directly related to overall service quality. The find ings of the study substantiated the findings of Berry et al. where reliability and responsiveness were shown to be important fac tors of service quality.

RESEARCH GAP AND pURpOSE OF THE STUDy

As per the literature re viewed for the present study in the banking sector various comparative studies in Indian context have been conducted. So as per the stiff competition in the market between these com panies, it is important to find out which banks are being per ceived better by the customers in terms of service quality. Dif ferent geographical locations, reach of people, different setups of various banks are encourag ing researchers to study the perceptions of customers time to time. Also customers have dif ferent mindset towards public and private sector banks about service quality. The reforms in the banking sector which were started in postreforms era have ushered radical changes in the financial market. The In dian banking sector is vast and there are big business opportu nities for the financial players. Before the entry of private sec tor and foreign banks in Indian

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banking industry, public sector banks had complete autonomy in the market. Service quality was not of much importance for the banking service providers because customers had no other option. In the postreforms era, Government of India opened the banking market to private players. As a result of this act, public sector banks service pro viders started thinking about their market share, as it started declining With almost all the public and private finance companies offering the same kind of ser vices and network coverage, the quality of service offered to the customers became one of the important differentiators for all

the public and private banks to maintain their competitive ad vantage in the market. Service quality refers to the perception of the customers of the organi zation regarding how well the organization is fulfilling their service needs. As said in the in troduction, measuring the qual ity of services provided is possi ble only through the perception of the quality of service that the customers are experiencing from their service providers.

MEASUREMENT SCAlE
Various definitions of the term service quality have been proposed in the past and, based on different definitions; different

scales for measuring service quality have been put forward. SERVQUAL and SERVPERF constitute two major service quality measurement scales. The consensus, however, contin ues to elude till date as to which one is superior. An ideal service quality scale is one that is not only psychometrically sound but is also diagnostically ro bust enough to provide insights to the managers for corrective actions in the event of qual ity shortfalls. Empirical studies evaluating validity, reliability, and methodological soundness of service quality scales clearly point to the superiority of the SERVPERF scale.

Table 1. Five Dimensions of Service Quality Tangibility Reliability Responsiveness Assurance Empathy Physical facilities, equipment, appearance of personnel Ability to perform promised service dependably and precisely Willingness to help customers and provide quick service Knowledge and courteous nature of employees and their ability to show trust and confidence Caring individualized attention the company provides to its customers pest control, dry cleaning, and fast food) to corroborate the su periority of their performance only instrument over discon firmationbased SERVQUAL scale. Being a variant of the SERVQUAL scale and contain ing perceived performance com ponent alone, performance only scale is comprised of only 22 items. A higher perceived per formance implies higher service quality. Methodologically, the SERVPERF scale represents marked improvement over the SERVQUAL scale. Not only is the scale more ef ficient in reducing the number of items to be measured by 50 per cent, it has also been em pirically found superior to the SERVQUAL scale for being able to explain greater variance in the overall service quality measured through the use of singleitem scale. This explains the consid erable support that has emerged over time in favour of the SERVPERF scale (Babakus and Boller, 1992; Churchill and Sur prenant, 1982; Woodruff, Cadotte and Jenkins, 1983). Though still lagging behind the SERVQUAL scale in application, researchers have increasingly started mak ing use of the performanceonly measure of service quality (Ba bakus and Boller, 1992; Boulding
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SERVpERF SCAlE
Cronin and Taylor (1992) were amongst the researchers who levelled maximum attack on the SERVQUAL scale. They questioned the conceptual ba sis of the SERVQUAL scale and found it confusing with service satisfaction. They, therefore, opined that expectation (E) com ponent of SERVQUAL be dis carded and instead performance (P) component alone be used. They proposed what is referred to as the SERVPERF scale. Besides theoretical arguments, Cronin and Taylor (1992) pro vided empirical evidence across four industries (namely banks,

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et al., 1993; Cronin and Taylor, 1992, 1994). Also when applied in conjunc tion with the SERVQUAL scale, the SERVPERF measure has outperformed the SERVQUAL scale (Babakus and Boller, 1992; Cronin and Taylor, 1992). Seeing its superiority, even Zeithaml (one of the founders of the SERVQUAL scale) in a re cent study observed that their results are not compatible with expectations and the gap forma tion for service quality. Instead, they found that perceived qual ity is directly influenced only by perceptions (of performance) (Boulding et al., 1993). This ad mittance cogently lends a testi mony to the superiority of the SERVPERF scale.

HyPOTHESIS
The hypothesis of the study is: H0 There is no significant difference in the service quality perceptions of public and private sector banks. H1 There is significant dif ference in the service quality perceptions of public and pri vate sector banks.

RESEARCH METHODOLOGy
In the present study, the ser vice quality model developed by Zeithamal, Parsuraman and Berry (1988) has been used with underlying assumption that service quality model is multi dimensional. These dimensions contribute to the assessment of service quality in any setting. A construct SERVPERF based upon service quality model has been used to determine service quality in different public and private sector banks. In SERVPERF construct all the statements are onedimen sional and performance based, which incorporate the state ments of SERVQUAL model that can be used for measure ment (Cronin and Taylor, 1992). In the questionnaire, 22 state ments were grouped under five dimensions. To ascertain the perceptions of service quality, Likerts 7 point scale was used for its suitability so that range and variations in the percep tions can be estimated. The Likerts scale 17 represents 1 strongly disagree and 7 as strongly agree. Two banking service provid ing banks State Bank of India (SBI) in public sector and In dustrial Credit and Investment Corporation of India (ICICI) in private sector were selected for this study on the basis of market share in Indian banking market. The service quality ratings were

OBJECTIVES OF THE STUDy

In the light of the above back ground, the main objective of this study is to identify the dimensions of service quality in the Banking industry using the SERVQUAL scale and to assess the impor tance of each of these dimensions in the Banking industry. The study is conducted with the fol lowing three objectives: 1. To determine the perceptions of customers regarding the service quality in banks. 2. To analyze and compare the service quality perceptions of the customers in public and private sector banks. 3. To determine the relevant di mensions of service quality.

SCOPE OF THE STUDy

The study was conducted in Dehradun city. The conclusions cannot be extended to entire Ut trakhand State or India. Fur ther study on a bigger scale can be conducted to validate the re sults.
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obtained using the SERVPERF scale. Sampling frame for the present study consists of account holders of State Bank of India (SBI) and Industrial Credit and Investment Corporation of India (ICICI) banks in Dehradun. The present study has been conduct ed in the city of Dehradun in Ut trakhand state. The respondents from the areas of Basant Vihar, Indira Nagar, Subhash Nagar, Sahaspur, Harbartpur etc. of Dehradun city were requested to give their responses with re spect to each banking institu tion with which they are having accounts. Field survey was con ducted in the period of Decem ber 20, 2009 to 12 February, 2010. Data was collected from the customers by distributing the structured questionnaires to the customers of the selected banks. The questionnaire given to the customers focused on all the dimensions of service qual ity as per the SERVPERF scale viz. Tangibles, Reliability, Re sponsiveness, Assurance, and Empathy. A pilot study was conduct ed to ascertain the suitabil ity of the SERVPERF construct (n=40) in Indian Banking set ting, because all the negative statements in the standardized scale were changed into positive statements. Reliability check has been performed to know the suitability of the construct for this industry. After ascertaining the suitability of the SERVPERF construct, the questionnaire was administered to the customers sample size of 235 respondents. Since pilot study results were in the favour of the construct, those responses were also included in the sample. The sample size for the study was 235 with 119 State Bank of India (SBI) cus tomers and 116 Industrial Cred it and Investment Corporation of India (ICICI) customers (See the Table No. 2).

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Table 2. SAMplE ClASSIFICATION No. 1 2 Company State Bank of India (SBI) Industrial Credit and Investment Corporation of India (ICICI) Total Number of Responses 119 116 235 percentage 50.63 49.37 100

The questionnaires were ad ministered by the researcher to get the responses from the respondents. Convenience sam pling method was used because of time constraint for collecting the data for the study.

DATA PRESENTATION
DEMOGRAPHIC PROFILE The questionnaire included a section on customers profile, as various demographic and other factors were likely to influence the customer services offered by the bank. Information on demographic features may also be helpful to provide services effectively. A demographic pro file of the respondents consisted of age, gender, marital status, educational qualifications, em ployment status, and monthly income. Among the respondents 54.5 percent were of the age group 26 to 35 years, and 27 per cent of 25 years and below age group. Majority of respondents

were males with 62.4 percent and females respondents were of less percentage of 37.6 percent. The majority of the respondents were married (55.2 percent), as percentage of unmarried was 44.8 percent. There were more post graduate respondents (65.2 percent) than graduate and oth ers. Moreover the occupational variables showed that the re spondents had major portion of professionals (69.0 percent), where as the percentage of self employment, wage employment, others were 4.3 percent, 19.5 percent, 5.7 percent respectively. In the survey it was also found that the respondents came from different income backgrounds; a major part of them (58.1 percent) earned more than Rs.10000 but above Rs.20000 were only 30.5 percent. DATA ANALySIS AND FINDINGS The SPSS software pack age 17.0 version was used for

analyzing the data collected for this study. The Microsoft Ex cel software package was also used to make some basic com putations like calculation of the mean values etc.

RELIABILITy TEST To test the reliability of the set of items forming the scale a measure of construct reliability (Cronbachs alpha) was comput ed. Cronbachs alpha is useful in measuring how well a set of variables or items measure a single, onedimensional latent construct. The alpha values of 0.70 or greater represent satis factory reliability of the items measuring the construct (dimen sion). These alpha coefficients were found to be 0.966 for State Bank of India (SBI) and 0.956 for Industrial Credit and Invest ment Corporation of India (ICI CI)making the items measuring the dimensions satisfactorily re liable (See the Table No. 4).

Table 3. RELIABILITy COEFFICIENT FOR DIMENSIONS OF SERVICE QUALITy Name of Insurance Company STATE BANK OF INDIA (SBI) INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI) OVERALL Number of Items 23 23 23 Cronbachs Alpha 0.966 0.956 0.961

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COMPARING THE SERVICE QUALITy DIMENSIONS The average scores of the two companies considered in the

study for all the five dimensions of service quality were compared (See the tables below). As could be seen in the results of the av erage scores, the results show

the dimensions of service qual ity where the companies need to improve their service levels to increase the service quality in the minds of customers.

Table 4. SCORES ON SERVQUAL SERVpERF DIMENSION Tangibles* Reliability* Responsiveness* Assurance* Empathy* INSURANCE COMPANy STATE BANK OF INDIA (SBI) 4.40 4.78 4.74 4.80 4.72 INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI) 3.78 3.37 3.70 3.82 3.74

No. 1 2 3 4 5

* Significant at 0.05 level of significance Table 5. AVERAGE SCORES FOR FIVE SERVICE QUALITy DIMENSIONS (QUESTION WISE) Tangibles Q. No. STATE BANK OF INDIA (SBI) 4.37 4.53 4.37 4.33 Reliability STATE BANK OF INDIA (SBI) 4.63 4.60 4.71 4.89 5.08 Responsiveness STATE BANK OF INDIA (SBI) 4.95 4.65 4.76 4.59 Assurance STATE BANK OF INDIA (SBI) 4.82 4.85 4.76 4.80 Empathy STATE BANK OF INDIA (SBI) 4.85 4.77 4.67 4.67 4.62

ICICI

ICICI

ICICI

ICICI

ICICI

1 2 3 4 5

3.69 3.85 3.98 3.62

3.52 3.44 3.09 3.23 3.55

3.82 3.70 3.63 3.67

3.71 3.78 3.94 3.83

3.91 3.90 3.54 3.60 3.72

See Questionnaire in the Appendix for questions 1, 2, 3, 4, and 5 of each dimension. RElEVANCE OF DIMENSIONS (CORRElATION ANALySIS) The relevance of various di mensions of service quality, which have been measured in the present study, was determined
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by calculating the correlation coefficient r values. The values for correlation coefficient r of all the dimensions of service quality namely; Tangibility, Reliability, Responsiveness, Assurance, and Empathy precisely indicate the relationship between the factors

(dimensions) and the service quality perception. The corre lation coefficient tables 6 and 7 for STATE BANK OF INDIA (SBI) and Industrial Credit and Investment Corporation of India (ICICI) are as shown below.

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Table 6. CORRELATION COEFFICIENT R VALUE TABLE FOR STATE BANK OF INDIA (SBI) FACTOR TANGIBILITY RELIABILITY RESPONSIVENESS ASSURANCE EMPATHY r VALUE .970 .972 .970 .967 .969

Table 7. CORRELATION COEFFICIENT R VALUE TABLE FOR INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI) FACTOR TANGIBILITY RELIABITY RESPONSIVENESS ASSURANCE EMPATHY All this clearly shows that all the five dimensions are very rel evant for service quality percep tions in banking sector in both cases of State Bank of India (SBI) and Industrial Credit and Investment Corporation of India (ICICI). EXPLORATORy FACTOR ANALySIS Exploratory factor analysis was performed to see whether the data collected are consistent with the prescribed structure. The results for factor analysis in case of State Bank of India (SBI) with KMO (0.935), Bar tletts Test of Sphericity (Chi square 2457.587, significance 0.000) and in case of Industrial Credit and Investment Corpora tion of India (ICICI) with KMO (0.927), Bartletts Test of Sphe ricity (Chisquare 1601.010, significance 0.000) proves that factor analysis done with the 22 service quality related variables is effective. Five factors were extracted using the methods of principal component analysis. In case of State Bank of India (SBI) there was cross loading of two items, and those two items 7 and 21 were deleted. After that again reliability analysis was done and value of Cronbachs alpha was 0.965. In case of Industrial Credit and Investment Corpora tion of India (ICICI) there was cross loading in three items, so those three items 3, 7, 21 were deleted. In this case also reliabil ity analysis was done and value of Cronbachs alpha was 0.965. The criterion as SPSS command for 5 factors was given. The five factors extracted from the 20 variables in case of State Bank of India (SBI) explain 78.34% of the variance, where as five fac tors extracted from 19 variables in case of Industrial Credit and Investment Corporation of India (ICICI) explain 77.07% of the variance. Principal Component Analysis using varimax rotation with Kaiser Normalization was employed to find the dimension ality of the data set collected. The loadings of the dimensions identified in factor analysis r VALUE .973 .945 .956 .967 .965 were stable. Each of the variable loaded high on a single factor. Cutoff point was 0.40 for both companies. MULTIPLE REGRESSION ANALySIS Multiple regression equa tions were developed to relate the customer overall service perception with the values of the SERVPERF dimensions col lected. For the purpose of devel oping the regression equations, the five service quality dimen sions were taken as the indepen dent variables and the customer overall service quality percep tion as the dependent variable. The dependent variable (cus tomer overall service quality perception) for the development of regression equations was tak en as the 23rd item mentioned in the questionnaire considered for the study. The Standardized Regression equations developed for the two companies consid ered for the study are:

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Table 8. STANDARDIZED REGRESSION EQUATION FOR INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI)
INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI) Overall service quality = 0.583(Empathy) + 0.459(Tangibles) + 0.304(Responsiveness)+ 0.211(Assurance) (0.069) (0.069) (0.069) (0.069) + 0.192 (Reliability) (0.069) R = 0.725

Figures in the parenthesis are standard errors of beta coefficients Table 9. STANDARDIZED REGRESSION EQUATION FOR STATE BANK OF INDIA (SBI)
STATE BANK OF INDIA (SBI) Overall service quality = 0.630(Empathy) + 0.475(Reliability) + 0.386(Assurance)+ 0.337(Responsiveness) (0.031) (0.031) (0.031) (0.031) + 0.207(Tangibles) (0.031) R = 0.928

Figures in the parenthesis are standard errors of beta coefficients Table 10. COMpARISON OF BETA-COEFFICIENT VAlUES OF TWO REGRESSION EQUATIONS Dimension Tangibility* Reliability* Responsiveness Assurance* Empathy STATE BANK OF INDIA (SBI) Beta Coefficient Values 0.207 0.475 0.337 0.386 0.630 INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI) Beta Coefficient Values 0.459 0.192 0.304 0.215 0.583

* Significant at 0.05 & 0.10 level of significance

Statistically beta coefficient values for reliability, assurance dimensions are higher in case of State Bank of India (SBI) as compared to Industrial Credit and Investment Corporation of India (ICICI). Whereas only one dimension tangibility got sta tistically higher beta coefficient

value for Industrial Credit and Investment Corporation of India (ICICI). HyPOTHESIS TESTING The present study was con ducted with a null hypoth esis that there is no significant

difference in the service qual ity perceptions public sector and private sector banks. The hypothesis was tested with the use of ttest. The results of ttest are:

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Table 11. Group Statistics

N VAR00002 STATE 5 BANK OF INDIA (SBI) Industrial Credit and Investment Corpora tion of India (ICICI) 5 Mean 4.6880 Std. Deviation .16459 Std. Error Mean .07361

VAR00001

3.6811

.18166

.08124

Table 12
Levenes Test for Equality of Variances ttest for equality of means 95% Confidence Interval of the Difference F VAR00001 Equal variances assumed Sig. t Df Sig. Mean (2tailed) Difference Std. Error Difference Lower Upper

.027

.875

9.185

.000

1.00690

.10963

0.75410

1.25970

Levenes test for equality of variances shows that F value is insignificant, so assumption of equal variances is accepted. With this evidence ttest for equality of means is conducted, and results show that t value is lying outside the confidence interval therefore the null hy pothesis is rejected. Further it proves findings of the present study that there is a difference in the service quality percep tions of customers in the public sector and private sector banks.

and public sector banks have been keeping pace with the growing and maturing market economy since this sector opened for private insurance players in 2000. The increased competition among public and private banks led to strengthening of pruden tial norms and technological in put to ensure better growth op portunities and on the other, a better service to the customers. Major findings of the present study can be concluded as: Present study included five dimensions of the service qual ity perceptions namely, tangi bility, reliability, responsive ness, assurance, and empathy. The analysis of these dimen sions identified that between public and private sector banks, private sector bank Industrial

STRATEGIC IMplICATIONS
The growth trail of Indian economy is reflected in the all sectors including banking sec tor, as it is also an indicator of a countrys economy. The private

Credit and Investment Corpo ration of India (ICICI) has high tangibility in terms of the em ployees, physical evidence and ambience. However public sec tor bank, State Bank of India (SBI) is the oldest bank, but em ployees of Industrial Credit and Investment Corporation of India (ICICI) are comparatively more professional. In case of ambi ence again private sector banks are spending more than public sector banks. Therefore custom ers perceive it as a quality tan gible offer in case of private sec tor bank. The analysis of reliability di mension places the public sector banks far ahead of the private sector banks. Public sector bank State Bank of India (SBI) is per ceived to be more reliable than private sector bank Industrial
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Credit and Investment Corpo ration of India (ICICI). It is this factor, on which the public sec tor banks have been able to im prove their perceptions among the customers. Due to this fact, the customers trust them. The analysis of the other di mension, responsiveness rep resents again the public sector banks as the front runners be tween public sector and private sector banks, but the difference is not as much substantial. The interpretation of this dimen sion can be done as the employ ees capability to respond to the customers. This fact is well represented in the voluminous increase in banking business of these public sector banks. The assurance dimension of service quality is also very high in public sector banks rather than private sector banks. The analysis revealed the same. This is also correlated to the factors of reliability dimension, as reliability leads to trust and support. Measurement of the fifth di mension empathy identifies bet ter understanding of customers needs as being very high in pub lic sector banks compared to pri vate sector banks. The results of all these five dimensions tan gibility, reliability, responsive ness, assurance and empathy can be summed as public sector bank State Bank of India (SBI) has significantly high quality perception among banking cus tomers as compared to private sector bank Industrial Credit and Investment Corporation of India (ICICI). The overall comparison be tween public sector and private sector banks identifies the public sector banks as having the high er quality perception than their private sector counterparts.

CONClUSIONS
In the increasing competi tion in banking industry after Indian Government opened this sector for foreign banks and pri vate sector, banks want to dif ferentiate themselves from the competitors and stay ahead in the race. The oldest and leading public sector bank State Bank of India (SBI) in India is facing very stiff competition from the new players entering the mar ket. Established players mainly State Bank of India (SBI) in the market is facing increased competition on one front and a decline in the market share on the other hand. At the same time they should also make sure that the service quality dimen sions like Reliability and Empa thy in which they are doing well are given their due importance. Moreover, in case of banking sec tor word of mouth also plays a vital role, so keeping this aspect into consideration, leading fi nancial services provider should focus on the service quality. Ser vice quality should be used as a strategic tool to get a competi tive advantage over the compet itors. State Bank of India (SBI) should focus on assurance and tangibility to further strengthen the level of service quality. The banking Industry today is expe riencing stiff competition and the major players, including State Bank of India (SBI) has come under pressure. Due to this cut throat competition in the bank ing sector, retaining a customer is cheaper than finding a new customer. Major players in the market especially State Bank of India (SBI) have to concentrate on retaining existing customers, which could offer huge business potential in terms of spreading positive word of mouth and also buying new products offered by

the company. If we talk about competition in service industry time, quality, product range and service create competitive ad vantage, but the decisive test comes in how these are used by the players to differentiate themselves. The service quality dimensions provided could be a basis for differentiation for the service providers, which could be developed into a Sustain able Competitive Advantage in the long run. These Nonprice instruments usually have more potency than price changes, be cause they are hard to match. Any reaction from the competi tors to match any of these may require a change in the entire service strategy. So, the existing players can focus on the vari ous service quality dimensions discussed in the present study to create a competitive advan tage which is sustainable and which cannot be easily matched by their new competitors in the long run. Issues like service quality were difficult to be imi tated by their competitors as it depended on many dimensions and needs a complete overhaul of the entire service strategy of the company. In case of private sector banks, they are competing in the market very aggressively. But the low score for reliability dimension is not a good signal for them. Private players need to focus on the reliability part, and at the same time since they are good at tangibles, they should le verage it for their rapid growth. Assurance is also one area they need to focus, so that customers can be made satisfied. In all it is the need of hour for both public sector and private sector banks to concentrate on all the five di mensions of service quality.

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SERVICE QUALLITy IMpROVEMENT SUGGESTIONS There is need of hour for the banking services to reaffirm themselves in view of the stiff competition. The banks shall have to reorient themselves in terms of the customer service parameters to instil the concept of quality service in the mind of the customer and further in terms of growth. In the language of strategy, the banks in the public sector should focus more on improv ing the infrastructure. The in frastructure not only involves the information technology in put in the branches, regional offices and head office, but also the physical evidence, ambience and layout. This is due to the fact that like in other service or ganizations, in banking services also the internal ambience of the organization has a positive impact on the customers. The customers trust the public sector banks since these banks have existed in the market for a longer period than the pri vate sector banks. The reliabil ity factor is a positive factor for these public sector banks. These public sector banks should posi tion themselves in the market on the basis of this dimension

and promote themselves aggres sively. This step will not only help them survive the present onslaught from private sector banks, but also be able to com pete in the market. Another observation is that the customer base of the pub lic sector banks is very large as compared to the private sector banks; therefore it is important to retain and satisfy those cus tomers with banks. It has be come dire need of the hour for the public sector banks to train their employees to treat the customers with empathy. This can give the required leading edge and finally the competitive advantage to the public sector banks. However, in order to be suc cessful in the market, the pri vate sector banks shall have to be more innovative in terms of the banking product offers to customers and compete with full strength in the market. One important aspect which needs concentration is reli ability. This aspect needs some relevant strategies. As indi cated by the study, the private sector banks lack reliability as compared to the public sector banks. So these private banking business players should make relevant strategies for gaining

reliability. They should high light the recent achievements in terms of number of accounts; prizes achieved in the field of customer service excellence etc. so that the customers are aware of these and trust more on these private sector banks. lIMITATIONS OF THE STUDy The study was limited only to the city of Dehradun. Due to the limitations in the time factor, the study was limited only to the major two banks one each from public sector and private sec tor. A single measure of service quality (SERVPERF) was used to measure the service quality of the service providers. SCOpE FOR FURTHER RESEARCH Taking into account the limi tations of the present study men tioned above, future research could focus on expanding the study to other banks and also by expanding the geographic reach of the study. Another compari son can be done among private and public sector banks in terms of products offered. Study can be done to measure the gap be tween expectation and percep tion of service quality for public sector and private sector banks.

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APPENDICES
APPENDIX 1 FACTOR LOADINGS FOR STATE BANK OF INDIA (SBI) 1 Tangible1 Tangible2 Tangible3 Tangible4 Reliability1 Reliability2 Reliability4 Reliability5 Responsiveness1 Responsiveness2 Responsiveness3 Responsiveness4 Assurance1 Assurance2 Assurance3 Assurance4 Empathy1 Empathy2 Empathy3 Empathy5 2 .846 .777 .832 .829 Factors loadings 3 4 5

.404 .554 .730 .681 .764 .735 .718 .805 .570 .850

.496 .505 .748 .563 .452

.443

.505

.475 .485 .475

.603 .562 .630 .718

FACTOR LOADINGS FOR INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA (ICICI) 1 Tangible1 Tangible2 Tangible4 Reliability1 Reliability2 Reliability4 Reliability5 Responsiveness1 Responsiveness2 Responsiveness3 Responsiveness4 Assurance1 Assurance2
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Factors loadings 3

4 .753 .700 .797

.433

.550 .796 .741 .759 .739 .879 .881 .406 .404

.667 .760 .720 .632

73

Assurance3 Assurance4 Empathy1 Empathy2 Empathy3 Empathy5

.551 .885

.477 .707 .739 .588 .573

.482

APPENDIX 2 QUESTIONNAIRE SERVICE QUALITy PERCEPTIONS ABOUT BANK Name of Bank: . Part I: Demographic Profile Please Mark ( ) your responses to the following : Factor 1. Age : Category a. 25 and below b. 26 35 c. 36 45 d. above 45 a. b. a. b. a. b. c. d. a. b. c. d. e. a. b. c. d. Male Female Married Unmarried Under Graduate Graduate Post Graduate Others SelfEmployment Wage Employment Professional* Student Others below 10,000 10,000 15,000 15,001 20,000 above 20,000 [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ [ ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ] ]

2. 3. 4.

Gender Marital Status Educational Qualification

: : :

5.

Employment Status

6.

Monthly Income (in Rs.)

* Professionals in the fields of Medicine, engineering, Information Technology, Management, Education etc.

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Part II: Customers (bank account holders) response Please show the extent to which your Bank offers the following services. On a scale of strongly disagree (1) to strongly agree (7), please circle the appropriate rating. Service quality item Your bank has uptodate equipment Your banks physical facilities are visually appealing Your banks customer service staffs are well dressed and appear neat The appearance of the physical facilities of Your bank is in keeping with the type of insurance services offered 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7

When Your bank promises to do something by a certain time, it does so When you have problems, Your bank is sympathetic and reassuring Your bank is dependable Your bank provides its services at the time it promises to do so Your bank keeps its records accurately

1 1 1 1 1 1 1 1 1

2 2 2 2 2 2 2 2 2

3 3 3 3 3 3 3 3 3

4 4 4 4 4 4 4 4 4

5 5 5 5 5 5 5 5 5

6 6 6 6 6 6 6 6 6

7 7 7 7 7 7 7 7 7

Your bank tells customers exactly when services will be performed You receive prompt service from Your bank staffs Your banks customer service staffs are always willing to help customers Your banks customer service staffs respond to customer requests promptly You can trust your customer service staffs. You feel safe in your transactions with Your banks customer service staffs Your banks customer service staffs are polite Your banks customer service staffs get adequate support from Your bank to do their jobs well Your bank gives you individual attention Your banks customer service staffs give you personal attention Your banks customer service staffs know what your needs are Your bank has your best interests at heart Your bank has operating hours convenient to all its customers How do you rate overall service quality of your bank.

1 1 1 1

2 2 2 2

3 3 3 3

4 4 4 4

5 5 5 5

6 6 6 6

7 7 7 7

1 1 1 1 1 1

2 2 2 2 2 2

3 3 3 3 3 3

4 4 4 4 4 4

5 5 5 5 5 5

6 6 6 6 6 6

7 7 7 7 7 7

THANK yOU FOR yOUR CO-OPERATION

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