Service Quality, Customer

Satisfaction, and Customer

Loyalty in Indian Commercial Banks

USHA LENKA, DAMODAR SUAR

AND PRATAP K.J. MOHAPATRA

This article examines whether service quality of Indian commercial banks increases
customer satisfaction that fosters customer loyalty. Data were collected from 350
valued customers of scheduled commercial bank branches in Orissa (India). A
questionnaire elicited information on socio-demographic variables along with
human, technical, and tangible aspects of service quality, customer satisfaction, and
loyalty. Results suggest that better human, technical and tangible aspects of service
quality of the bank branches increase customer satisfaction. Human aspects of
service quality were found to influence customer satisfaction more than the technical
and tangible aspects. Customer satisfaction furthers customer loyalty. Increase in
service quality of the banks can satisfy and retain customers. In the Indian banking
sector, human aspects are more important than technical and tangible aspects
of service quality that influence customer satisfaction and promote and enhance
customer loyalty.

Usha Lenka is Research Scholar in the Department of Humanities and Social

Science at IIT Kharagpur (India); Damodar Suar is Professor, Department
of Humanities and Social Science, IIT Kharagpur (India) and Pratap
K.J. Mohapatra is Professor, Department of Industrial Engineering and
Management, IIT Kharagpur (India).

Post-liberalisation in 1990s has witnessed tremendous changes in

the Indian banking sector as a part of financial sector reforms. Prior to
economic liberalisation, public sector banks enjoyed a protected market.
After liberalisation, Indian banks were exposed to free market competition
and consequently, the strategic need for customer retention. Banks tend
to emphasise customer retention because the cost of acquisition of new
customers is higher than their retention. Intense competition and con-
tinuously evolving customer demands have led Indian banks to identify

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SAGE Publications Los Angeles/London/New Delhi/Singapore/Washington DC
DOI: 10.1177/097135570801800103
48 / Usha Lenka, Damodar Suar and Pratap K.J. Mohapatra

drivers of customer satisfaction and loyalty. Customers are the major

decision makers in any marketing effort. They select a service offering
that adds value to them and optimises their satisfaction. Therefore, bank
managers are seeking out most influential determinants of customer satis-
faction and loyalty. Customers’ satisfaction leads to their loyalty that helps
in realising economic success of the firm in terms of profitability, market
share and return on investment (Reichheld, 1996; Scheuing, 1995). This
paper examines whether service quality influences customers satisfaction
that furthers customers’ loyalty in Indian commercial banks. Customers’
expectations vary across cultures. Therefore, this study makes an attempt
to identify which aspects of service quality of banks are important in de-
termining customers’ satisfaction in the Indian context.
Customers’ assessment about the service quality of a firm depends on
their service encounter. Service quality can be assessed in terms of inter-
action with service personnel, technology interface and physical evidence.
Traditionally, service quality is the difference between customers’ expect-
ation and performance of the service actually delivered. Parasuraman
et al. (1988) suggest a measurement scheme using SERVQUAL that
provides a 22-item scale to assess service quality on five-dimensions:
reliability, responsiveness, assurance, empathy and tangibility. Reliability
is the ability of employees to perform the promised service accurately.
Responsiveness is the willingness of employees to provide prompt service.
Assurance is the knowledge and courtesy of employees and their ability to
instil trust and confidence in customers. Empathy is care and individualised
attention given to customers. Tangibility includes physical evidence of
the service. These dimensions focus on human aspects of service delivery
and tangible aspects of the firm. The SERVQUAL instrument has been
subjected to criticism (Brown et al., 1993). It has not considered the
technical aspect that is an important dimension in service delivery pro-
cess. Organisations can create a niche in post-liberalised market by
deploying the state-of-the-art technology. Moreover, the SERVQUAL
instrument measures service quality of a firm on customers’ perception
and expectation using separate scales. Therefore, an assessment instru-
ment is needed to capture both perception and expectation on human,
tangible and technical aspects of service quality.
Customers perceive service on the basis of the attributes of service
personnel and those of a service firm. Customer-oriented attributes of
service personnel are reliability, responsiveness, assurance and empathy

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 Service Quality, Customer Satisfaction, & Customer Loyalty / 49

that reflects the soft quality attributes of service providers (Zeithaml &
Bitner, 2000). Favourable interpersonal interactions between customers
and employees based on these attributes can improve customer satisfaction
(Hartline et al., 2000; Parasuraman et al., 1985). Reliability helps em-
ployees to consistently respond to customer needs and meet deadlines.
Employees with responsiveness and assurance have a greater knowledge
about the company’s products, services and the needs of customers. Em-
pathy helps in improving communication process between employees
and customers. Due to the psychological and physical closeness that
exists between employees and customers in service encounters, employees’
attitudes often have a ‘spill over’ effect on customer satisfaction. If em-
ployees experience favourable affective responses in their jobs, their
customers are likely to receive positive service experiences.
The attributes of the service firm are called ‘hard quality’. These are the
technology and tangibles aspects of service quality. Changing nature of
service delivery adopting speed, safety and integrity has led to the adop-
tion of technology. Technology invasion in Indian banks started with the
introduction of magnetic ink character reader, currency note counting
machine and automation of front-and-back-office operations of the
branches. Bank customers can conduct their transactions over the internet,
telephone and cell-phone and through ATM, debit cards and electronic
banking. Bank branches are linked to the head office through centralised
banking solutions in collaboration with information technology consultants
such as IBM, HP and Accenture. Information technology improves cus-
tomer service as it is convenient to access and use (Bitner, et al., 2000).
Accurate and timely information aids to managerial decision making for
improving operational efficiency of the firm. Banking technologies help
banks and customers to keep up-to-date information. When customers
use ATMs, banks capture data about their current balance and amounts of
withdrawal. Customers also realise the reliability of the computer systems.
All these technology-enabled transactions incur benefits to bankers and
customers. These transactions require less employee involvement and
more banking technologies. Technology-enabled services thus provide
constant reliable and quality service.
Tangible cues in the physical environment of a service firm influence
behaviour of customers and their future purchase decisions (Burgers
et al., 2000). Tangible elements include exterior facility of the firm like
parking, interior decor, furniture and the equipment used. Consumers look

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50 / Usha Lenka, Damodar Suar and Pratap K.J. Mohapatra

at these tangible elements and infer about the firm and its service per-
formance. Services are intangible and customers are often present during
the process. Therefore, physical environment can have an influence on
customer perception of service quality (Baker et al., 2002; Parasuraman
et al., 1988). Accordingly, it is proposed that better human, technical and
tangible aspects of bank services will increase the satisfaction level of
customers.
Customers’ satisfaction is a combination of their cognitive and affective
response to service encounters. Service quality is the overall evaluation
of a firm’s service delivery system. Service quality is the managerial de-
livery of services while satisfaction is customers’ experiences with those
services. Improved service quality will result in more customer satisfaction
(Bitner et al., 1994; Cronin & Taylor, 1992). Customers’ assessment of the
product/service, its demand, alternative services available in the market
and information gathered from others help them to evaluate the product/
service in comparison with other products/services. Cognitive evaluation
through information search results in customers’ affective responses in
the form of satisfaction or dissatisfaction. In such an evaluation, if cus-
tomers’ expectations are met with respect to human, technical and tan-
gible aspects of the service, they are more likely to feel satisfied with the
product/service.
Customers’ expectations vary across cultures and industries (Furrer et al.,
2000; Sureshchandar et al., 2002). India is a vertically collectivistic cul-
ture. Power distance co-exists with collectivistic values of interpersonal
sensitivity, cooperation, and interdependence (Triandis, 1996). Business
transactions in a collectivistic culture like India emphasising social
bonding are different from those of individualistic cultures emphasising
structural bonding (Dash et al., 2007). Therefore, service transactions in
India are more likely to depend on interpersonal relationships of service
personnel with the customers. Services are intangible, inseparable, per-
ishable and heterogeneous. Though service firms adopt standardised and
formal procedures in service delivery using technology, healthy inter-
actions between employees and customers remain central because of the
nature of services. Therefore, the human aspects of service quality are
likely to be more important than the technical and tangible aspects in
determining customer satisfaction. We therefore propose the following
hypotheses:

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 Service Quality, Customer Satisfaction, & Customer Loyalty / 51

H1: Human, technical and tangible aspects of service quality will have
a positive effect on customer satisfaction.
H2: Human aspects of service quality will have grater positive influence
on customer satisfaction than the technical and tangible aspects.

Customer loyalty is a deeply held commitment to repurchase a product/

service consistently in the future despite some alternatives available in
the market. The cost of attracting new customers is more than the cost of
retaining old customers. Loyal customers have an emotional attachment
with product/service, and they cannot be attracted by any other brand
that offers even a better deal. Customer loyalty consists of attitudinal and
behavioural loyalty. Attitudinal loyalty is customers’ favourable inclination
towards a product/service based on the cumulative experience. If an alter-
native brand with better attributes and a cheaper price is available in
the market, such customers are likely to defect. On the contrary, behav-
ioural loyalty is strong commitment of customers to purchase the product/
service despite the availability of alternatives in the market. It represents
the actual purchase behaviour of customers. It is also revealed through
the willingness of customers to recommend that product/service to others.
Loyal customers desire to continue the relationship with the firm. Repeat
purchases and recommendations to other customers are indicators of
loyalty.
A customer always prefers to buy a product/service that is safe
and involves low risk (Sheth & Parvatiyar, 1995). Risks involved in a
transaction can be financial loss, poor performance of the product/service
and loss of time. To avoid risk, customers try to learn more about the
product/service through information search. Customers with higher
income, education and awareness engage in more information processing
prior to purchase of a product/service. Customers satisfied with the
products/services are more likely to be loyal to the provider (Anderson &
Sullivan, 1993; Bolton & Drew, 1991). Customers’ satisfaction pro-
motes loyalty in terms of patronage and repeat purchase (Mittal &
Kamakura, 2001). In the light of the above, we propose the following
hypothesis:

H3: Customer satisfaction will increase customer loyalty.

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52 / Usha Lenka, Damodar Suar and Pratap K.J. Mohapatra

Incorporating all hypotheses, a model is proposed for testing (see

Figure 1).

FIGURE 1
The Conceptual Model with Hypothesised Relationships

‘+’ indicates positive and direct impact.

Method

The hypotheses have been tested by analysing the responses to a question-

naire survey which was carried out on a sample of valued customers of
scheduled commercial banks in Orissa State (India).

Sample

According to the Reserve Bank of India Report (Karunagaran, 2006), the

number of commercial bank branches in Orissa was 2,286 as on 30 June
2005. Out of 2,286 commercial bank branches, 350 (15 per cent) bank
branches were included in the survey. Using the purposive sampling plan,
from each branch, a valued customer was surveyed. A valued customer is
one who has a certain minimum amount of fixed deposit as specified by
the bank. The valued customers who were included in the sample were
identified by the branch managers of the respective branches.
The valued customers were given the questionnaires. They were as-
sured complete confidentially and were requested to return the filled-in
questionnaires within a fortnight. The responses to the questionnaires were
collected personally. A total of 315 responses were obtained resulting in
a response rate of 90 per cent.

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The salient demographic features of the customers are summarised

in Table 1. The respondents were around 40 years of age, most of them
had education up to graduation level and about a quarter had technical
education. On the average, they had more than 16 years of transactions
with the bank.

TABLE 1
Sample Profile of Customers

Customer
Variable M SD
Age (in years) 38.28 9.87
Years of transaction 16.72 2.04
Education in years 15.3 2.42
Technical education (%) 27.9%
Management education (%) 17.8%
Others (%) 54.3%

Measures

Besides the socio-demographic variables on age, years of transaction and

years of formal educational including technical, management and other
professional education—data on service quality, customer satisfaction and
customer loyalty were collected through self-reported questionnaires. The
valued customers assessed service quality, their satisfaction with services
and loyalty to the banks.

Human Aspects of Service Quality

Eight items depicting human aspects of service were adapted from the scale
of Sureshchandar et al. (2002). Combining expectations and perceptions
into a single measure (Brown et al., 1993), valued customers of the banks
reported their perception of human aspects of service quality of banks on
a five-point Likert type scale. Item wordings were modified to suit bank
customers. Sample items included were ‘Bank employees are polite and
friendly’, ‘Employees of this bank carry out customer transactions con-
fidentially’ and ‘Employees of this bank provide customers with precise
information of services available in the bank’. High total score on the eight
items indicated improved human aspects of service quality.

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54 / Usha Lenka, Damodar Suar and Pratap K.J. Mohapatra

Technical Aspects of Service Quality

Four items were used for this purpose. The items adapted were from a
scale by Zhu et al. (2002). Valued customers were asked to rate each
item, using a five-point scale ranging from ‘much worse than I expected’
(=1) to ‘much better than I expected’ (=5). Items included were ‘The
computerised system in this bank is fast, accurate and efficient’, ‘Ability to
access the computerised service with minimal effort (like ATM, e-banking,
and so on)’, ‘Reliability associated with the technical functioning of the
computerised facility’ and ‘Data are not shared and credit information is
secure in computerised transactions’. Higher additive scores on four items
indicated improved technical aspects of service quality.

Tangible Aspects of Service Quality

Three items on tangible aspects of service quality (Sureshchandar et al.,

2002) were used. Valued customers of the banks were asked to rate each
item using a five-point scale similar to the ones described above. The items
were: ‘The ambient conditions such as temperature, ventilation, noise and
odour prevailing in the bank’s premises’, ‘Extent of the physical layout
of equipment and other furnishings being comfortable for customers to
interact with employees’ and ‘Visually appealing signs, symbols, adver-
tisement boards, pamphlets and other artefacts in the bank’. Higher score
on three items indicated improved tangible aspects of service quality.

Customer Satisfaction

Customer satisfaction was assessed using a three-item scale (Oliver,

1997). Response categories against each item were on a five-point Likert-
type scale ranging from ‘strongly disagree’ (=1) to ‘strongly agree’ (=5).
Items were: ‘Overall, I am satisfied with the physical setting of the bank’,
‘I am satisfied with the banking skills, courtesy and friendliness of bank
employees’ and ‘I am satisfied with the computerised facility of the
bank’. Higher additive scores on three items indicated greater customer
satisfaction.

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Customer Loyalty

This was measured using three items of the scale developed by Zeithaml
et al. (1996). The response descriptions against each item were on a
5-point Likert-type scale ranging from ‘strongly disagree’ (=1) to ‘strongly
agree’ (=5). Items were: ‘I consider investing in this bank in future’,
‘I recommend other people to invest in this bank’, and ‘I inform my friends
of the advantages of investing in this bank’. Higher scores indicated more
customer loyalty.
The convergent and discriminant validities of the constructs were tested
by Confirmatory Factor Analysis (CFA). We chose to eliminate items with
factor loading of less than 0.4. The purpose of this stage of the analysis was
to identify and eliminate poorly performing items. Only the items of the
construct on technical aspects of service quality were eliminated. Along
with descriptive statistics, various fit measures of the scales were obtained.
These are given in Table 2. Along with validity of items, the inter-item
consistency of each construct was reported (Cronbach alpha > .60).

Results

Each bank branch was the unit of analysis in the survey. The valued cus-
tomers assessed the service quality, their satisfaction with the banks and
loyalty to the bank branches. Pearson correlations among the variables
were estimated to indicate the hypothesised relationships (see Table 3).
Improved human, technical and physical aspects of service quality of the
bank branches enhanced customer satisfaction. The more the customers
were satisfied with service quality of the bank branches, the more they
preferred to stay attached with the same service provider and recommended
the service provider to their friends and acquaintances.
Path analysis of structural equation modeling tests the sequential rela-
tionships among a series of independent and dependent variables. It tests
the complex models in a single analysis. A direct model was tested to see
whether human, technical, and tangible aspects of service quality enhanced
customer loyalty. The path coefficients from technical and tangible aspects

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 TABLE 2
Scale Reliability and Validity

No. of No. of
Original Items Cronbach Fit Measures
Variable Items Retained M SD α GFI CFI NFI RMSEA Loading Range
Human aspects of service quality 8 8 27.25 4.07 .82 .94 .92 .90 .08 0.63–0.74
Technical aspects of service quality 6 4 10.25 2.02 .79 .99 1.00 .99 0 0.77–0.91
Tangible aspects of service quality 3 3 12.35 3.51 .71 1.00 1.00 1.00 0 0.64–0.86
Customer satisfaction 3 3 10.62 1.94 .74 1.00 1.00 1.00 0 0.68–0.74
Customer loyalty 3 3 10.40 1.80 .84 .98 .96 .92 .07 0.64–0.72
 Service Quality, Customer Satisfaction, & Customer Loyalty / 57

TABLE 3
Inter-Correlations Among the Studied Variables

Variable 1 2 3 4 5
1. Human aspects of service quality
2. Technical aspects of service quality 0.19***
3. Tangible aspects of service quality 0.27*** 0.26***
4. Customer satisfaction 0.52*** 0.45*** 0.43***
5. Customer loyalty 0.22*** 0.11 0.13* 0.56***

Notes: * p < 0.05; ** p < 0.01; *** p < 0.001.

of service quality to customer loyalty were non-significant. Only the path

coefficient from human aspects of service quality to customer loyalty was
significant suggesting that human aspects of service quality enhanced
customer loyalty (see Figure 2).
FIGURE 2
The Direct Model with Standardised and Unstandardised Path Coefficients

Notes: *** p < .001.

→ Non-significant. ξ→ Error terms.
a
Indicates unstandardised path coefficients
b
Values in parentheses indicate standardised path coefficients

A comparative model depicting the hypothesised relationship was also

tested. The path coefficients from human, technical and tangible aspects of
service quality directly determined customer satisfaction. With increase in
these aspects of service quality in bank branches, the customers felt more
satisfied. The results supported the first hypothesis (see Figure 3).

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58 / Usha Lenka, Damodar Suar and Pratap K.J. Mohapatra

FIGURE 3
The Hypothesised Relationships with Path Coefficients

Notes: *** p < .001.

a
Indicates unstandardised path coefficient,
b
value in parentheses indicates its standard error.
c
Values in parentheses indicate standardised path coefficients
ξ→ Error terms.

The path coefficients measure the hypothesised effect of one variable

on another. When there are direct paths, standardised path coefficients
reveal the relative importance of the independent variables (Bollen, 1989;
Hair et al., 1998). First, the comparison of standardised path coefficients
suggested that human aspects of service quality was the most important
indicator of customer satisfaction followed by the technical and tangible
aspects of service quality. Second, the coefficient of determination (R2) of
each service quality dimension with customer satisfaction was estimated
to further ascertain the effects. The R2 value of human aspects of service
quality (0.27) was again most important followed by technical (0.20)
and tangible aspects of service quality (0.18). This ascertained the earlier
conclusions and supported the second hypothesis.
In the direct model, only the human aspects of service quality positively
related to customer loyalty. But in the hypothesised model, service quality
via customer satisfaction determined customer loyalty suggesting that cus-
tomers’ satisfaction promoted their loyalty. Findings thus, supported the
last hypothesis.
The fit measures of the direct and the hypothesised path model (Table 4)
indicated that the obtained chi-squares of all the models were highly

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TABLE 4
Fit Measures of Two Models

Model χ² df χ²/ df GFI CFI NFI RMSEA PGFI PCFI PNFI

Direct 66.82 18 3.71 .84 .81 .82 .08 .64 .62 .65
Hypothesised 67.12 21 3.19 .90 .89 .89 .07 .70 .66 .68

significant (p < .001) although non-significant values were desired for

similarity between observed and model-implied covariance matrix. The
relative chi-square (χ2/df ) was not below the required value of 3 (Kline, 1998).
Because of the sensitivity of chi-square to large sample size, the other fit
measures of the model were considered. The Goodness of fit index (GFI)
is analogous to R2 in multiple regression. Comparative fit index (CFI) in-
dicates the overall fit of the model relative to a null model and Normed
fit index (NFI) adjusts for the complexity of the model. These measures
(GFI, CFI, NFI) were close to 0.90 in the hypothesised model suggesting
the good fit of the hypothesised model compared to the direct model. The
parsimonious fit indices of these measures (PGFI, PCFI, PNFI) that were
less sensitive to sample size also favoured the hypothesised over the direct
model even more. Root mean square error of approximation (RMSEA)
indicates the approximation of the observed model to the true model. The
lower the RMSEA, the better is the model. RMSEA was lowest in the
hypothesised model. All these fit indices suggested that the hypothesised
path model provided a better fit to the data than the rival direct model.
The hypothesised model supported all hypotheses.

Discussion

Findings revealed that improved human, technical and tangible aspects of

service quality increase customer satisfaction. Human aspects of service
quality were more potently found to influence customer satisfaction com-
pared to technical and tangible aspects. Customers’ satisfaction enhanced
their loyalty to the bank branches.
Hartline et al. (2000) and Parasuraman et al. (1985) have developed
a conceptual framework according to which efficient interpersonal inter-
actions between customers and employees (human aspects of service
quality) can improve customer satisfaction. Our study confirmed these
notions. Customers’ personal interaction with the bank managers and
their information dissemination about benefits of latest financial and

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60 / Usha Lenka, Damodar Suar and Pratap K.J. Mohapatra

investment options can help customers make informed decisions. Advice,

trust and social bonds between the customers and bank managers do impact
customer satisfaction.
Corroborating earlier findings, our results showed that technical aspects
of service quality increased customers’ satisfaction (Bitner et al., 2000).
Indian banks are adopting latest technology to meet the challenges of
speed, efficiency and changing customer demands and provide value-
added services to their customers. It includes e-banking systems and
ATMs. These user-friendly self-service technologies help customers to
perform banking transactions. It helps in obtaining information on pur-
chasing financial products. ATM and internet banking help customers to
check balance, pay utility bills, transfer money and obtain information
on mutual funds. Technology helps banks to work as a marketing agency
in selling products, like RBI bonds, credit cards, life insurance, and so on.
Core Banking Solutions has enabled customers to operate their account
from any branch of a bank. State Bank of India has launched Vishwa Yatra
(world tour) debit card facility for convenience of customers travelling
abroad. Such innovations in banking transactions are made possible by
centralising the bank databases. Educated and technology conscious
Indian customers generally prefer self-service technologies as they are
accessible, confidential, convenient and expeditious.
Better tangible aspects of service quality of the bank branches enhance
customers’ satisfaction. Baker et al. (2002) studying the retail store envir-
onment found that the multiple store environment cues had positive influ-
ence on customers’ perceived merchandise value and patronage intentions.
We clubbed all the environmental cues of the bank branches to specify the
tangible aspects of service quality that promoted customer satisfaction.
Nature of service transactions greatly depends on the physical layout
of the workplace. Common complaints regarding servicescape include
inability to concentrate on work because of noise and distraction, lack
of privacy, poorly arranged work spaces, discomfort in temperature,
lighting and ventilation. These tangible cues impact on how customers
view a service firm. Customers in banks prefer those services which have
comfortable and convenient physical evidence, planned layout and well-
managed queues. Apart from the physical décor of the workplace, tangible
aspects also include display of current guidelines regarding rate of interest
in each investment plan, required charges for bank transactions (for ex-
ample, issue and cancellation of drafts), charges to open an account and

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 Service Quality, Customer Satisfaction, & Customer Loyalty / 61

other facilities provided by the banks. These advertisements in bank

premises draw customers’ attention when they enter the bank. Taking a cue
from the physical evidence of private sector banks like Industrial Credit
and Investment Corporation of India (ICICI), Housing Development and
Financial Corporation (HDFC), Unit Trust of India (UTI), and ING Vysya
banks, all public sector banks like State Bank of India, Punjab National
Bank, Canara Bank and Oriental Bank of Commerce are restructuring
their physical evidence to make it more attractive and convenient to
customers.
Service quality was measured by the cognitive evaluation of services
delivered by the bank employees, technology deployed by the banks and
their physical evidence. Customers evaluated whether the services de-
livered by bank branches were convenient to them. A positive perception
of service quality indicated the level of customers’ satisfaction.
Indian customers tended to accept dualism. They accepted modernity
and also remained close to traditionality. Higher levels of occupation, edu-
cation and income tend to reinforce the use of modern technologies and
to embrace culturally-valued human relationships. Product attributes,
price, speed and accuracy though essentials, cannot in and of themselves,
generate competitive advantage for the bank. Products and technology in
the banking sector are quickly imitated. Competitive advantage lies in the
inimitable and tacit behavioural aspects. No matter how sophisticated the
technology deployed, the décor and the amenities available in the bank
branches, performance of the banks on the whole is judged on the basis of
employee performance. The human aspects are very important drivers of
service performance in Indian banks (Dash et al., 2007). Customers de-
velop personal relationships with service personnel through this process.
Communication and information flow between the parties make for
better relationships. It includes feelings of understanding, empathy and
friendship. Customers with strong social bonds with service personnel are
more committed (Wilson & Mummalaneni, 1988). Social relationships
with customers help develop successful service encounters, assess needs
of customers, and avoid uncooperative and complaining behaviours of
customers.
Satisfied customers are loyal and hence tend to choose the same service
providers. This has been supported by past research (Rust & Zahorik,
1993; Rust, et al., 2000) and replicated in this study in the Indian banking
sector. Happy customers are the most cost effective form of advertising.

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62 / Usha Lenka, Damodar Suar and Pratap K.J. Mohapatra

Disappointed customers will not only take away their business but will
probably tell several others about their experience.
Customers are informed about latest investment plans and the financial
benefit in each plan. Bank managers inform their customers about certain
transactions and rule changes which they are unaware of (e.g. hike in
locker charges, keeping an account active and benefits of medical insur-
ance policies). They help customers avail loans on favourable terms and
conditions. The concepts of ‘customer help desk’ and ‘relationship man-
ager’ are being introduced in the Indian banking sector. These are a few
examples to satisfy customers and make them loyal.
There are certain limitations of the study that must be acknowledged.
Only valued customers were studied. Therefore, caution must be exercised
in generalising the findings. Notwithstanding the limitations, this study pro-
vides clear evidence in the Indian context that human factors in service
design and delivery are required to be given more importance because
these are the main drivers of customer satisfaction. But, technical and tan-
gible aspects cannot be neglected because they also bring satisfaction.
Customer satisfaction promotes their loyalty. Further studies are needed
to examine the successive direct link between service quality, customer
satisfaction, customer loyalty and market performance of the bank
branches in terms of total deposits and net profit.

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