A Study to find the Gaps in services Offered by Indian Bank with

regard to Customer Expectations and Deliverables in Chennai.

Dissertation submitted to PRIST UNIVERSITY, Thanjavur in Partial

Fulfillment of the requirements for the award of the Degree
MASTER OF PHILOSOPHY IN MANAGEMENT

Submitted by

J.RAJALAKSHMI

CENTER FOR DISTANCE EDUCATION

PRIST UNIVERSITY
 THANJAVUR

JUNE 2010

3.1 RESEARCH METHODOLOGY

3.1.1 RESEARCH DESIGN

This study used the descriptive research design also called explanatory research design. This is typically
concerned with determining frequency with which something occurs or how two variables vary
together. This study is typically guided by initial hypothesis. Descriptive research design requires a clear
specification of who, what, when, where, why and how aspects of the research design. It requires
formulation of more specific hypotheses and testing these through statistical inference techniques.

3.1.2 SAMPLING DESIGN

The research was conducted with the help of both primary which includes questionnaire method and
secondary data which includes data from company records, articles, magazines, internet and various
other books on the subject matter.

3.1.3 ANALYTICAL TOOLS USED

DATA ANALYSIS AND INTERPRETATION

Research Analyst often finds data analysis the most gratifying part of carrying out a study, since after all
of the hard work and waiting they get the chance to find out the answers. So analyzing the data and
interpreting the results are the “reward” for the work of collecting the data. Data do not, however,
“speak for themselves”. They reveal what the analyst can detect. As with most other aspects of a study,
analysis and interpretation of the study should relate to the study objectives and research questions.
The usual analysis approach is to begin with descriptive Then attention is given to specific questions
from the study aims or hypotheses, from findings and questions from studies reported in the literature,
and from patterns suggested by the descriptive analyses.
 ACKNOWLEDGEMENT

Sometimes words fail to express one’s real gratitude, since acknowledgement is

not a mere play of words, but an attitude of mind.

I praise the God almighty and my parents who had given me the courage and
Confidence to undertake this dissertation.

The Pleasure, the achievement, the glory, the satisfaction and the construction of
My dissertation cannot be thought without a few, how apart from their regular
schedule, Spared valuable times for me.

This dissertation would not have been a real fulfillment without the backing and
cooperation from various individuals through various means”

“I owe everlasting gratefulness to many people who pleasantly involved

themselves in helping me undertake this dissertation

I am heartily thankful to my Guide professor Mr.K.selvamani,M.com.,M.Phil.,

whose encouragement, supervision and support from the preliminary to the
concluding level enabled me to develop an understanding of the subject. who is
guiding light and source of inspiration towards the competition of the
project.

No words of gratitude will suffice for the great support extended by DR.K.K. KARTHICK,
B.Com.,MBA.,M.phil.,Phd., DIRECTOR,DEPARTMENT OF MANAGEMENT
STUDIES,PMR INSTITUTE OF TECHNOLOGY.

“I owe everlasting gratefulness to Mr. Muthukrishnan,Manager, Indian Bank,

Aadambakkam branch Without his corporation I could not have gotten such
relevant data.

I thank my Husband for his love, affection and support which helped for
the successful completion of this work.

Finally ,I especially indebted to my friends who had been a source of

great and constant moral support till this juncture right from the beginning.
 CERTIFICATE

This is to certify that the Dissertation titled “A Study to find the Gaps in Services Offered by Indian Bank with
Regard to customer Expectations and Deliverables “in Chennai, Submitted by J.RAJALAKSHMI (Register
No.033MO9C40001) is a bonafide record of original Research work done by her Under My Guidance at PRIST
UNIVERSITY ,THANJAVOUR, in partial fulfillment for the requirement of the award of the degree of Master of
Philosophy in Management and the Dissertation has not formed on the basis for the award of any Degree,
Associate ship, Fellowship or any other similar titles.

PLACE: CHENNAI SIGNATURE OF THE GUIDE

DATE:
Reforms in banking sector:

The last decade has seen many positive developments in the Indian banking sector.
The policy makers, which comprise the Reserve Bank of India (RBI), Ministry of
Finance and related
Government and financial sector regulatory entities, have made several notable
efforts to
Improve regulation in the sector. The sector now compares favourably with
banking sectors in the region on metrics like growth, profitability and Non-
performing assets (NPAs). A few banks have established an outstanding track
record of Innovation, growth and value creation. This is reflected in their market
valuation. However, improved regulations, innovation, growth and value creation
in the sector remain limited to a small part of it. The cost of banking intermediation
in India is higher and bank penetration is far lower than in other markets. India’s
banking industry must strengthen itself significantly if it has to support the modern
and vibrant economy which India aspires to be. While the onus for this change lies
mainly with bank managements, an enabling policy and regulatory framework will
also be critical to their success. The failure to respond to changing market realities
has stunted the development of the financial sector in many developing countries.
A weak banking structure has been unable to fuel continued growth, which has
harmed the long-term health of their economies. Now there is a need to act both
decisively and quickly to build an enabling, rather than a limiting, banking sector
in India.
GOOD PERFORMANCE, QUESTIONABLE HEALTH
Indian banks have compared favourably on growth, asset quality and profitability
with other Regional banks over the last few years. The banking index has grown at
a compounded annual
rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in
the market index for the same period. Policy makers have made some notable
changes in policy and regulation to help strengthen the sector. These changes
include strengthening prudential norms, enhancing the payments system and
integrating regulations between commercial and co-operative banks. However, the
cost of intermediation remains high and bank penetration is limited to only a few
customer segments and geographies. While bank lending has been a significant
driver of GDP growth and employment, periodic instances of the “failure” of some
weak banks have often threatened the stability of the system. Structural
weaknesses such as a fragmented industry structure, restrictions on capital
availability and deployment, lack of institutional support infrastructure, restrictive
labour laws, weak corporate governance and ineffective regulations could
seriously weaken the health of the sector. Further, the inability of bank
managements (with some notable exceptions) to improve capital allocation,
increase the productivity of their service platforms and improve the performance
ethic in their organisations could seriously affect future performance.
OPPORTUNITIES AND CHALLENGES FOR PLAYERS
The bar for what it means to be a successful player in the sector has been raised.
Four challenges must be addressed before success can be achieved. First, the
market is seeing discontinuous growth driven by new products and services that
include opportunities in credit cards, consumer finance and wealth management on
the retail side, and in fee-based income and investment banking on the wholesale
banking side. These require new skills in sales & marketing, credit and operations.
Second, banks will no longer enjoy windfall treasury gains that the decade-long
secular decline in interest rates provided. This will expose the weaker banks. Third,
with increased interest in India, competition from foreign banks will only intensify.
Fourth, given the demographic shifts resulting from changes in age profile and
household income, consumers will increasingly demand enhanced institutional
capabilities and service levels from banks.
ONE OF THREE SCENARIOS WILL PLAY OUT BY 2010
The interplay between policy and regulatory interventions and management
strategies will determine the performance of Indian banking over the next few
years. Legislative actions will shape the regulatory stance through six key
elements: industry structure and sector on solidation; freedom to deploy capital;
regulatory coverage; corporate governance; labour reforms and human capital
development; and support for creating industry utilities and service bureaus.
Management success will be determined on three fronts: fundamentally upgrading
organizational capability to stay in tune with the changing market; adopting value-
creating M&A as an avenue for growth; and continually innovating to develop new
business models to access
Untapped opportunities. Through these scenarios, we paint a picture of the events
and outcomes that will be the consequence of the actions of policy makers and
bank managements. These actions will have dramatically different outcomes; the
costs of inaction or insufficient action will be high. Specifically, at one extreme,
the sector could account for over 7.7 per cent of GDP with over Rs... 7,500 billion
in market cap, while at the other it could account for just 3.3 per cent of GDP with
a market cap of Rs. 2,400 billion. Banking sector intermediation, as measured by
total loans as a percentage of GDP, could grow marginally from its current levels
of ~30 per cent to ~45 per cent or grow significantly to over 100 per cent of GDP.
In all of this,
The sector could generate employment to the tune of 1.5 million compared to 0.9
million today.
Availability of capital would be a key factor — the banking sector will require as
much as Rs. 600 billion (US$ 14 billion) in capital to fund growth in advances,
non-performing loan (NPL) write offs and investments in IT and human capital up
gradation to reach the high-performing scenario. Three scenarios can be defined to
characterize these outcomes: High performance: In this scenario, policy makers
intervene only to the extent required to ensure system stability and protection of
consumer interests, leaving managements free to drive far-reaching changes.
Changes in regulations and bank capabilities reduce intermediation costs leading to
increased growth, innovation and productivity. Banking becomes an even greater
driver of GDP growth and employment and large sections of the population gain
access to quality banking products.
Management is able to overhaul bank organizational structures, focus on industry
consolidation
And transform the banks into industry shapers. In this scenario we witness
consolidation within
Public sector banks (PSBs) and within private sector banks. Foreign banks begin to
be active in M&A, buying out some old private and newer private banks. Some
M&A activity also begins to take place between private and public sector banks.
As a result, foreign and new private banks
Grow at rates of 50 per cent, while PSBs improve their growth rate to 15 per cent.
The share of the private sector banks (including through mergers with PSBs)
increases to 35 per cent and that of foreign banks increases to 20 per cent of total
sector assets. The share of banking sector value adds in GDP increases to over 7.7
per cent, from current levels of 2.5 per cent. Funding this dramatic growth will
require as much as Rs. 600 billion in capital over the next few years.
Evolution: Policy makers adopt a pro-market stance but are cautious in liberalising
the industry. As a result of this, some constraints still exist. Processes to create
highly efficient organisations have been initiated but most banks are still not best-
in-class operators. Thus, while the sector emerges as an important driver of the
economy and wealth in 2010, it has still not come of age in comparison to
developed markets. Significant changes are still required in policy and regulation
and in capability-building measures, especially by public sector and old private
sector banks. In this scenario, M&A activity is driven primarily by new private
banks, which take over some old private banks and also merge among themselves.
As a result, growth of these banks
increases to 35 per cent. Foreign banks also grow faster at 30 per cent due to a
relaxation of some regulations. The share of private sector banks increases to 30
per cent of total sector
assets, from current levels of 18 per cent, while that of foreign banks increases to
over 12 per cent of total assets. The share of banking sector value adds to GDP
increases to over 4.7 per cent. Stagnation: In this scenario, policy makers
intervene to set restrictive conditions and
management is unable to execute the changes needed to enhance returns to
shareholders
and provide quality products and services to customers. As a result, growth and
productivity
levels are low and the banking sector is unable to support a fast-growing economy.
This scenario sees limited consolidation in the sector and most banks remain sub-
scale. New
Private sector banks continue on their growth trajectory of 25 per cent. There is a
slowdown
in PSB and old private sector bank growth. The share of foreign banks remains at 7
per cent
of total assets. Banking sector value add, meanwhile, is only 3.3 per cent of GDP.
NEED TO CREATE A MARKET-DRIVEN BANKING SECTOR WITH
ADEQUATE FOCUS ON SOCIAL DEVELOPMENT
The term “policy makers” used in this document, as mentioned earlier, refers to the
Ministry of Finance and the RBI and includes the other relevant government and
regulatory entities for the
banking sector. We believe a co-ordinate effort between the various entities is
required to enable positive action. This will spur on the performance of the sector.
The policy makers need
to make co-ordinate efforts on six fronts:1) Help shape a superior industry
structure in a phased manner through “managed consolidation “and by enabling
capital availability. This would create 3-4 global sized banks controlling 35-45 per
cent of the market in India; 6-8 national banks controlling 20-25 per cent of the
market; 4-6 foreign banks with 15-20 per cent share in the market, and the rest
being specialist players (geographical or product/ segment focused).2) Focus
strongly on “social development” by moving away from universal directed norms
to an explicit incentive-driven framework by introducing credit guarantees and
market subsidies to encourage leading public sector, private and foreign players to
leverage technology to innovate and profitably provide banking services to lower
income and rural markets.3 )Create a unified regulator, distinct from the central
bank of the country, in a phased manner to overcome supervisory difficulties and
reduce compliance costs.4)Improve corporate governance primarily by increasing
board independence and accountability.5)Accelerate the creation of world class
supporting infrastructure (e.g., payments, asset reconstruction companies (ARCs),
credit bureaus, back-office utilities) to help the banking sector focus on core
activities.6) Enable labour reforms, focusing on enriching human capital, to help
public sector and old private banks become competitive.
NEED FOR DECISIVE ACTION BY BANK MANAGEMENTS
Management imperatives will differ by bank. However, there will be common
themes across classes of banks:
 PSBs need to fundamentally strengthen institutional skill levels especially in
sales and marketing, service operations, risk management and the overall
organisational performance ethic. The last, i.e., strengthening human
capital will be the single biggest challenge.
 Old private sector banks also have the need to fundamentally strengthen
skill levels.
However, even more imperative is their need to examine their participation in the
Indian banking
sector and their ability to remain independent in the light of the discontinuities in
the sector
 New private banks could reach the next level of their growth in the Indian
banking sector by continuing to innovate and develop differentiated business
models to profitably serve segments
like the rural/low income and affluent/ HNI segments; actively adopting
acquisitions as a means to grow and reaching the next level of performance in their
service platforms.Attracting, developing and retaining more leadership capacity
would be key to achieving this and would pose the biggest challenge.
 Foreign banks committed to making a play in India will need to adopt
alternative approaches to win the “race for the customer” and build a value-
creating customer franchise in advance of regulations potentially opening up
post 2009. At the same time, they should stay in the game for potential
acquisition opportunities as and when they appear in the near term. Maintaining
a fundamentally long-term value-creation mindset will be their greatest
challenge.
The extent to which Indian policy makers and bank managements develop and
execute such a clear and complementary agenda to tackle emerging discontinuities
will lay the foundations for a high-performing sector in 2010.
2. Brief Literature Review
Defining and measuring quality in services might be difficult due to the intangible nature of
the service offering. Many of the researches on service quality have been carried out within
the framework of widely accepted service quality model (SERVQUAL instrument) developed
by extensive research by Parasuraman et. al. (1985, 1988, and 1991). Since then, many
researchers have used this 22-item scale to study service quality in different sectors of the
services industry including financial institutions (Gounaris et. al. 2003; Arasli et. al. 2005).
Basically, the service quality model was derived from the magnitude and directions of five
gaps as follows:

• Gap 1 (Understanding): the difference between consumer expectations and

management perceptions of consumer expectations

• Gap 2 (Service standards): the difference between management perceptions of

consumer expectations and service quality specifications
 • Gap 3 (Service performance): the difference between service quality specifications
and the service actually delivered
Tahir & Bakar 329
 • Gap 4 (Communications): the difference between service delivery and what is
communicated about the service to consumers

• Gap 5 (Service quality): the difference between customer expectations of service

quality and customer perceptions of the organization’s performance

Gaps 1 to 4 affect the way in which service is delivered and these four gaps lead to Gap 5.
Therefore, the extent of Gap 5 depends on the size and direction of these four gaps (Gap 1,
Gap 2, Gap 3 and Gap 4).
In the banking industry, the study on service quality has been undertaken for example by
Yavas et. al. (1997), Bahia and Nantel 2000; Lassar et. al., 2000; Duncan and Elliott, 2002;
Jabnoun and Al-Tamimi, 2002; and Arasli et. al., 2005.
In the study of service quality in the banking sector in Turkish banking, Yavas et. al. (1997),
focused on the relationship between service quality on consumer satisfaction, complaint
behaviour and commitment. Their study found that overall service quality was a significant
determinant customer satisfaction, complaint behaviour and commitment.
Bahia and Nantel (2000) suggested alternative scale for the measurement of perceived
service quality in retail banking. Their study found that when comparing BSQ dimensions
and SERVQUAL, it seemed that BSQ dimensions were more reliable than SERVQUAL. On
the other hand, Lassar et. al. (2000) studied service quality using two major service quality
constructs, SERVQUAL and Technical/Functional Quality models to the private banking
industry. They found that Technical/Functional Quality-based model of service quality is
better suited compared to SERVQUAL-based model. Duncan and Elliot (2002) however
explored the relationship between customer service quality and financial performance in
Australian banks and credit unions. They found that there was significant relationship
between financial performance and customer service quality scores.
Jabnoun and Al-Tamimi (2002) examined service quality at UAE commercial banks using
SERVQUAL model and included thirty items in the five dimensions of SERVQUAL. When
they tested the developed instrument for reliability and validity, they found that the
instrument had only three dimensions.
Finally, Arasli et. al. (2005) studied service quality perceptions of Greek Cypriot bank
customers using SERVQUAL model. They however, extend the study by looking at the
relationship between service quality, customer satisfaction and positive word of mouth.
They found that the expectations of bank customers were not met where the largest gap
was obtained in the responsiveness-empathy dimension. In addition, the reliability items
had the highest effect on customer satisfaction, which in turn had a statistically significant
impact on the positive word of mouth. Tahir & Bakar 330
Contrary to the large number of studies of service quality in the banking industry in the west,
studies are still considered scarce. In Malaysia, for example, studies on service quality were
conducted by for example, Sudin et. al. (2004) and Izah and Wan Zulqurnain (2005). These
two studies were conducted on Islamic financial institutions and adopted the CARTER
model as suggested by Othman and Owen (2000; 2001).
OBJECTIVES OF THE STUDY

• To examine customers’ expectations and perceptions of service quality provided by

the commercial banks in Malaysia

• To assess customers’ satisfaction towards the service quality of commercial banks

in Malaysia.

INTRODUCTION

Service Sector
Service sector is the lifeline for the social economic growth of country. It is today the largest and fastest growing
sector globally contributing more to the global output and employing more people than any other sector.

The real reason for the growth of the service sector is due to the increase in urbanization, privatization and more
demand for intermediate and final consumer services. Availability of quality services is vital for the well being of the
economy.

In advanced economies the growth in the primary and secondary sectors are directly dependent on the growth of
services like banking, insurance, trade, commerce, entertainment etc.

Indian Service Sector

In alignment with the global trends, Indian service sector has witnessed a major boom and is one of the major
contributors to both employment and national income in recent times. The activities under the purview of the service
sector are quite diverse. Trading, transportation and communication, financial, real estate and business services,
community, social and personal services come within the gambit of the service industry

FINANCIAL SERVICE SECTOR

Financial services in India has taken a giant leap from the days of standing in banks queue for several hours for
opening a saving account or trying to get some fixed deposits (FD) done. The financial services have increased
manifold and now people have the choice to choose the one that most suitably fits the bill.

There are several services like broking firms, investment services, financial consulting, evergreen national banks,
numerous private banks, mutual funds, car and home loans, equity market and other banking services. Services are
many and offered by blue chip names of the industry. Most of the companies in financial segment offer taxation
services, project consultancy services and all the services of wide financial gamut.
Whether it’s taking a car loan or booking your favorite house, going for pension plan or getting your child insured,
numerous attractive financial services are available at affordable costs. Personal banking services have acquired an
altogether new meaning. Now customers have multiple choices to choose from. One can find all the financial services
on the internet that are just a call away.

The financial services sector has played a critical role in fulfilling the needs of the growing and increasingly diverse
economy, offering high-quality services to businesses and individuals alike. The availability of efficient financial
services has been a key driver of business growth and profitability, and the ability of people to meet their needs for
housing and other lifestyle aspirations. ndia has successfully created world-class financial institutions, catering to the
entire gamut of needs of households and businesses. Change and growth are throwing up new opportunities and
challenges for the Indian financial services sector.

The most prominent trend in the Indian financial services sector has been the growth in consumer credit. Strong
economic growth propelled by the knowledge economy and a favourable demographic profile, with 69 per cent of the
population being less than 35 years of age, has spurred consumption demand. Although banks have been serving
this market, the potential remains large. With income levels poised to improve further and the favourable
demographic profile ensuring that a large proportion of the population is in the economically active working age
group, consumer finance will continue to grow in the coming years. For the financial services sector, this means
providing retail customers access to the full array of financial services products, ranging from credit to insurance.

After a period of restructuring and repositioning, Indian industry has emerged with renewed vigour as a driver of
economic growth. Companies have learnt the importance of both operating and financial discipline. Businesses have
changed their mindsets, cleaned up their shop floors, restructured their balance sheets, and improved their products
in terms of functionality and quality. We are now in the initial stages of a renewed corporate investment cycle, with
Indian firms planning investments in sectors such as metals, energy and infrastructure. This provides an important
growth opportunity for banks in terms of project and working capital financing and investment banking, as well as
treasury and risk management products.

The international markets also present a major growth opportunity. Across a range of industries, companies are
establishing manufacturing bases overseas, building distribution networks, registering intellectual property patents
and acquiring rights to natural resources. Cross-border mergers and acquisitions have not only increased in terms of
number of deals but also in terms of the size of deals and sectoral distribution of such deals. The large non-resident
Indian community is a vast market for Indian banks that can provide them the desired level of product sophistication
and service quality, for their India-linked requirements as well as in their countries of residence.

Technology will play a key role in the competitive positioning of Indian banks internationally. Managing this equation
has given banks a significant technology cost advantage compared to banks in developed countries. This low-cost
base can be a big source of competitive advantage.

Enhancing access to financial services is a major element of the approach towards realising the potential of rural
India. The rural economy represents a large latent demand for credit, savings and risk mitigation products like
insurance. It is only by delivering financial services to people in the rural areas and lower income categories that they
can be brought within the ambit of economic activity and the full potential of the country’s physical and human
resources can be realised. The rural markets are, therefore, the next horizon of growth and banks will have to create
holistic propositions to address this opportunity. This will call for a deeper and more comprehensive understanding of
rural needs. Banks have to invent a new business model where they can create a distribution base effectively in
600,000 villages in India and learn to do that at one-tenth the cost of urban India.

Banking service Quality

The issue of quality management within banking services has drawn considerable
attention over the past few years. The move to managed service has increased
demands for outcome-based accountability, cost containment, and attention to
customer-focused quality in order to remain competitive in a rapidly changing
environment. This dual focus on driving down costs while increasing quality has
intensified pressures to understand, measure, and manage quality from a customer
perspective.

In banking industry, banking systems provide the same types of services, but they do
not provide the same quality of services. Furthermore, customers today are more aware
of alternatives and their expectations of service have increased. Service quality can,
therefore, be used as a strategic tool to build a distinctive advantage over competitors.
Banks are striving for zero defection and retaining every customer that the company can
profitably serve in order to achieve service excellence . The achievements of zero
defections require continuous efforts to improve the quality of the service delivery
system. Although quality can not be improved unless it is measured, it can be defined
from several perspectives, e.g., the ability to satisfy the needs and expectations of the
customer or the totality of features and characteristics of a product or service that bears
on it’s ability to satisfy given needs . While there is an increasing recognition of the
importance of quality in banking services, its conceptualization and empirical
assessment have remained limited. Quality is still an elusive construct for many human
services organizations. This is due to the difficulty in shifting a customer-oriented
viewpoint . Since the central tenet of the quality paradigm is the importance of
understanding and utilizing customer data to drive operational and strategic decisions,
defining quality from the outside-in based on customer information is critical. As
customers do not easily articulate banking service quality, the recipient of the service
can only really assess it, thereby making its measurement more subjective than exact.
Hence, the measurement of banking service quality has to be based on perceived
quality rather than objective quality because services are intangible, heterogeneous and
their consumption and production occur simultaneously. It is believed that service
quality is a measure of how well the service level matches customers’ expectations.
perceived service quality as a result of what customers receive it. Parasuraman defined
service quality as perceived by customers and items from a comparison on their
expectations of the services they will receive with their perceptions of the performance
of the service provider. Expectations are the wants of customers, i.e., what they feel a
service provider should offer, while perceptions refer to the customers’ evaluation of the
service provider.

Measuring the quality of a service can be a very difficult exercise. Unlike product where there are
specific specifications such as length, depth, width, weight, colour etc. a service can have numerous
intangible or qualitative specifications. In addition there is there expectation of the customer with
regards the service, which can vary considerably based on a range of factors such as prior experience,
personal needs and what other people may have told them.

SERVQUAL – a methodology for measuring service quality

As a way of trying to measure service quality, researchers have developed a methodology known as
SERVQUAL – a perceived service quality questionnaire survey methodology. SERVQUAL examines five
dimensions of service quality:
 Reliability
  Responsiveness
 Assurance;
 Empathy, and
 Tangible (e.g. appearance of physical facilities, equipment, etc.)
For each dimension of service quality above, SERVQUAL measures both the expectation and perception
of the service on a scale of 1 to 7, 22 questions in total. Then, each of the five dimensions are weighted
according to customer importance, and the score for each dimension multiplied by the weighting.
Following this, the Gap Score for each dimension is calculated by subtracting the Expectation score from
the Perception score. A negative Gap score indicates that the actual service (the Perceived score) was
less than what was expected (the Expectation score).

The Gap score is a reliable indication of each of the five dimensions of service quality. Using SERVQUAL,
service providers can obtain an indication of the level of quality of their service provision, and highlight
areas requiring improvement.

Gap Analysis

Gap analysis generally refers to the activity of studying the differences between standards and
the delivery of those standards. For example, it would be useful for a firm to document
differences between customer expectation and actual customer experiences in the delivery of
medical care. The differences could be used to explain satisfaction and to document areas in need
of improvement.

However, in the process of identifying the gap, a before-and-after analysis must occur. This can take
several forms. For example, in lean management we perform a Value Stream Map of the current
process. Then we create a Value Stream Map of the desired state. The differences between the two
define the "gap". Once the gap is defined, a game plan can be developed that will move the organization
from its current state toward its desired future state.

Another tool for identifying the gap is a step chart. With the step chart, various "classes" of
performance are identified—including world-class status. Then, current state and desired future
state are noted on the chart. Once again, the difference between the two defines the "gap".

The issue of service quality can be used as an example to illustrate gaps. For this example, there
are several gaps that are important to measure. From a service quality perspective, these include:
(1) service quality gap; (2) management understanding gap; (3) service design gap; (4) service
delivery gap; and (5) communication gap.

Service Quality Gap.

Indicates the difference between the service expected by customers and the service they
actually receive. For example, customers may expect to wait only 20 minutes to see their
doctor but, in fact, have to wait more than thirty minutes.
Management Understanding Gap.

Represents the difference between the quality level expected by customers and the perception
of those expectations by management. For example, in a fast food environment, the customers
may place a greater emphasis on order accuracy than promptness of service, but management
may perceive promptness to be more important.

Service Design Gap.

This is the gap between management's perception of customer expectations and the
development of this perception into delivery standards. For example, management might
perceive that customers expect someone to answer their telephone calls in a timely fashion. To
customers, "timely fashion" may mean within thirty seconds. However, if management designs
delivery such that telephone calls are answered within sixty seconds, a service design gap is
created.

Service Delivery Gap.

Represents the gap between the established delivery standards and actual service delivered.
Given the above example, management may establish a standard such that telephone calls
should be answered within thirty seconds. However, if it takes more than thirty seconds for
calls to be answered, regardless of the cause, there is a delivery gap.

Communication Gap.

This is the gap between what is communicated to consumers and what is actually delivered.
Advertising, for instance, may indicate to consumers that they can have their cars's oil changed
within twenty minutes when, in reality, it takes more than thirty minutes.

IMPLEMENTING GAP ANALYSIS

Gap analysis involves internal and external analysis. Externally, the firm must communicate with
customers. Internally, it must determine service delivery and service design. Continuing with the
service quality example, the steps involved in the implementation of gap analysis are:

 Identification of customer expectations

 Identification of customer experiences
 Identification of management perceptions
 Evaluation of service standards
 Evaluation of customer communications

The identification of customer expectations and experiences might begin with focus-group
interviews. Groups of customers, typically numbering seven to twelve per group, are invited to
discuss their satisfaction with services or products. During this process, expectations and
experiences are recorded. This process is usually successful in identifying those service and
product attributes that are most important to customer satisfaction.
After focus-group interviews are completed, expectations and experiences are measured with
more formal, quantitative methods. Expectations could be measured with a one to ten scale
where one represents "Not At All Important" and ten represents "Extremely Important."
Experience or perceptions about each of these attributes would be measured in a similar manner.

Gaps can be simply calculated as the arithmetic difference between the two measurements for
each of the attributes. Management perceptions are measured much in the same manner. Groups
of managers are asked to discuss their perceptions of customer expectations and experiences. A
team can then be assigned the duty of evaluating manager perceptions, service standards, and
communications to pinpoint discrepancies. After gaps are identified, management must take
appropriate steps to fill or narrow the gaps.

THE IMPORTANCE OF SERVICE QUALITY GAP ANALYSIS

The main reason gap analysis is important to firms is the fact that gaps between customer
expectations and customer experiences lead to customer dissatisfaction. Consequently,
measuring gaps is the first step in enhancing customer satisfaction. Additionally, competitive
advantages can be achieved by exceeding customer expectations. Gap analysis is the technique
utilized to determine where firms exceed or fall below customer expectations.

Customer satisfaction leads to repeat purchases and repeat purchases lead to loyal customers. In
turn, customer loyalty leads to enhanced brand equity and higher profits. Consequently,
understanding customer perceptions is important to a firm's performance. As such, gap analysis
is used as a tool to narrow the gap between perceptions and reality, thus enhancing customer
satisfaction.

Gap Analysis
Gap analysis generally refers to the activity of studying the differences between standards and
the delivery of those standards. For example, it would be useful for a firm to document
differences between customer expectation and actual customer experiences in the delivery of
medical care. The differences could be used to explain satisfaction and to document areas in need
of improvement.

However, in the process of identifying the gap, a before-and-after analysis must occur. This can
take several forms. For example, in lean management we perform a Value Stream Map of the
current process. Then we create a Value Stream Map of the desired state. The differences
between the two define the "gap". Once the gap is defined, a game plan can be developed that
will move the organization from its current state toward its desired future state.

Another tool for identifying the gap is a step chart. With the step chart, various "classes" of
performance are identified—including world-class status. Then, current state and desired future
state are noted on the chart. Once again, the difference between the two defines the "gap".

The issue of service quality can be used as an example to illustrate gaps. For this example, there
are several gaps that are important to measure. From a service quality perspective, these include:
(1) service quality gap; (2) management understanding gap; (3) service design gap; (4) service
delivery gap; and (5) communication gap.

Service Quality Gap.

Indicates the difference between the service expected by customers and the service they
actually receive. For example, customers may expect to wait only 20 minutes to see their
doctor but, in fact, have to wait more than thirty minutes.

Management Understanding Gap.

Represents the difference between the quality level expected by customers and the perception
of those expectations by management. For example, in a fast food environment, the customers
may place a greater emphasis on order accuracy than promptness of service, but management
may perceive promptness to be more important.

Service Design Gap.

This is the gap between management's perception of customer expectations and the
development of this perception into delivery standards. For example, management might
perceive that customers expect someone to answer their telephone calls in a timely fashion. To
customers, "timely fashion" may mean within thirty seconds. However, if management designs
delivery such that telephone calls are answered within sixty seconds, a service design gap is
created.

Service Delivery Gap.

Represents the gap between the established delivery standards and actual service delivered.
Given the above example, management may establish a standard such that telephone calls
 should be answered within thirty seconds. However, if it takes more than thirty seconds for
calls to be answered, regardless of the cause, there is a delivery gap.

Communication Gap.

This is the gap between what is communicated to consumers and what is actually delivered.
Advertising, for instance, may indicate to consumers that they can have their cars's oil changed
within twenty minutes when, in reality, it takes more than thirty minutes.

IMPLEMENTING GAP ANALYSIS

Gap analysis involves internal and external analysis. Externally, the firm must communicate with
customers. Internally, it must determine service delivery and service design. Continuing with the
service quality example, the steps involved in the implementation of gap analysis are:

 Identification of customer expectations

 Identification of customer experiences
 Identification of management perceptions
 Evaluation of service standards
 Evaluation of customer communications

The identification of customer expectations and experiences might begin with focus-group
interviews. Groups of customers, typically numbering seven to twelve per group, are invited to
discuss their satisfaction with services or products. During this process, expectations and
experiences are recorded. This process is usually successful in identifying those service and
product attributes that are most important to customer satisfaction.

After focus-group interviews are completed, expectations and experiences are measured with
more formal, quantitative methods. Expectations could be measured with a one to ten scale
where one represents "Not At All Important" and ten represents "Extremely Important."
Experience or perceptions about each of these attributes would be measured in a similar manner.

Gaps can be simply calculated as the arithmetic difference between the two measurements for
each of the attributes. Management perceptions are measured much in the same manner. Groups
of managers are asked to discuss their perceptions of customer expectations and experiences. A
team can then be assigned the duty of evaluating manager perceptions, service standards, and
communications to pinpoint discrepancies. After gaps are identified, management must take
appropriate steps to fill or narrow the gaps.

THE IMPORTANCE OF SERVICE QUALITY GAP ANALYSIS

The main reason gap analysis is important to firms is the fact that gaps between customer
expectations and customer experiences lead to customer dissatisfaction. Consequently,
measuring gaps is the first step in enhancing customer satisfaction. Additionally, competitive
advantages can be achieved by exceeding customer expectations. Gap analysis is the technique
utilized to determine where firms exceed or fall below customer expectations.
Customer satisfaction leads to repeat purchases and repeat purchases lead to loyal customers. In
turn, customer loyalty leads to enhanced brand equity and higher profits. Consequently,
understanding customer perceptions is important to a firm's performance. As such, gap analysis
is used as a tool to narrow the gap between perceptions and reality, thus enhancing customer
satisfaction.

Industry profile

The Indian Banking Industry can be categorized into non-

scheduled banks and scheduled banks. Scheduled banks
constitute of commercial banks and co-operative banks. There
are about 67,000 branches of Scheduled banks spread across
India. As far as the present scenario is concerned the Banking
Industry in India is going through a transitional phase.

The reserve bank of india:

RBI is the central bank of the country since 1934. It regulates,

controls credit, issue licenses and functions as banker of all banks
and the government.

The Public Sector Banks(PSBs):

 These are the base of the Banking sector in India account

for more than 78 per cent of the total banking industry
assets. Unfortunately they are burdened with excessive Non
Performing assets (NPAs), massive manpower and lack of
modern technology. On the other hand the Private Sector
Banks are making tremendous progress. They are leaders in
Internet banking, mobile banking, phone banking, ATMs. As
far as foreign banks are concerned they are likely to succeed
in the Indian banking industry.
 Allahabad Bank .Andhra Bank ,Bank of Baroda ,Bank of India ,Bank of Maharashtra ,Canara
bank ,Central Bank of India ,Corporation Bank ,Dena Bank ,Indian Bank ,Indian Overseas Bank ,
 Oriental Bank of Commerce ,Punjab & Sind Bank ,Punjab National Bank ,Syndicate Bank ,UCO
Bank, Union Bank of India ,United Bank of India ,Vijaya Bank

Private sector banks:

In the Indian Banking Industry some of the Private Sector Banks
operating are
 Axis Bank
 Bank of Rajasthan
 Catholic Syrian Bank
 City Union Bank
 Development Credit Bank
 Dhanalakshmi Bank
 Federal Bank
 HDFC Bank
 ICICI Bank
 IndusInd Bank
 ING Vysya Bank
 Jammu & Kashmir Bank
 Karnataka Bank
 Karur Vysya Bank
 Kotak Mahindra Bank
 Laxmi Vilas Bank
 Nainital Bank Ltd
 Ratnagar Bank
 SBI Commercial and International Bank
 South Indian Bank Ltd
 Tamil Nadu Mercantile Bank
 Yes Bank

Foreign banks:

ANZ Grindlays Bank, ABN-AMRO Bank, American Express Bank

Ltd, Citibank are some of the foreign banks operating in the
Indian Banking Industry.

Indian Ocean International Bank Ltd. (IOIB) Mauritius, Port Louis

United Kingdom,
Punjab National Bank International Limited (PNBIL)
London

Bank of Baroda (Trinidad and Tobago) Limited Trinidad & Tobago

PT Bank Swadesi Tbk Indonesia

Foreign banks

Banks with branches in India as of Apr 2008. [3]

 ABN AMRO Bank N.V.

 Abu Dhabi Commercial Bank Ltd
 American Express Bank
 Antwerp Diamond Bank
 Arab Bangladesh Bank
 Bank International Indonesia
 Bank of America
 Bank of Bahrain & Kuwait
 Bank of Ceylon
 Bank of Nova Scotia
 Bank of Tokyo Mitsubishi UFJ
 Barclays Bank
 BNP Paribas
 Calyon Bank
 ChinaTrust Commercial Bank
 Citibank
 DBS Bank
 Deutsche Bank
 HSBC (Hongkong & Shanghai Banking Corporation)
 JPMorgan Chase Bank
 Krung Thai Bank
 Mashreq Bank
 Mizuho Corporate Bank
 Oman International Bank
 Shinhan Bank
 Société Générale
 Sonali Bank
 Standard Chartered Bank
 State Bank of Mauritius

Banks with Representative Offices in India:

American Banks

 The Bank of New York

 Wachovia Bank

Australian Banks
  Commonwealth Bank
 National Bank Australia
 Westpac Banking Corporation

Austrian Banks

 Raiffeisen Zentral Bank Osterreich

Belgian Banks

 Fortis Bank.
 K.B.C. Bank N.V.

Canadian Banks

 Royal bank of Canada

UAE Banks

 Emirates Bank International

French Banks

 Credit Industriel et Commercial

 Natixis

German Banks

 Bayerische Hypo und Vereinsbank

 Commerzbank
 Dresdner Bank
 DZ Bank AG Deutsche Zentral – Genossenschafts Bank
 HSH Nordbank
 Landesbank Baden – Wurttemberg

Irish Banks

 DEPFA Bank

Italian Banks

 Banc Intesa Banca Commerciale Italiana

 Banca di Roma
 Banca Populare Di Verona E Novara
 Banca Popolare di Vicenza
 BPU Banca –Banche Popolari Unite
 Monte Dei Paschi Di Sienna
  Sanpaolo IMI Bank
 Uni Credito Italiano

Nepalese Banks

 Everest Bank

Portuguese Banks

 Caixa Geral de Depositos

Russian Banks

 Vnesheconombank
 VTB India
 Promsvyazbank

South African banks

 First Rand Bank

South Korean Banks

 Wori Bank

Spanish Banks

 Banco de Sabadell
 Banco Bilbao Vizcaya Argentaria

SriLankan Banks

 Hatton National Bank

Swiss Banks

 UBS
 Zurcher Kantonalbank
 Saqib Saeed Qureshi

Types of banks

Banks' activities can be divided into

Retail Banking: dealing directly with individuals and small businesses;

Business Banking: providing services to mid-market business;

corporate banking: directed at large business entities;

Private banking: providing wealth management services to high net worth

individuals and families

Investment Banking: relating to activities on the financial markets. Most banks

are profit-making, private enterprises. However, some are owned by government,
or are non-profit organizations.

Central banks: are normally government-owned and charged with quasi-regulatory

responsibilities, such as supervising commercial banks, or controlling the cash
interest rate. They generally provide liquidity to the banking system and act as the
lender of last resort in event of a crisis.

Community Banks: locally operated financial institutions that empower

employees to make local decisions to serve their customers and the partners.

Community development banks: regulated banks that provide financial services

and credit to under-served markets or populations.

Postal savings banks: savings banks associated with national postal systems.

Private banks: banks that manage the assets of high net worth individuals.

Offshore banks: banks located in jurisdictions with low taxation and regulation.
Many offshore banks are essentially private banks.

Savings bank: Their original objective was to provide easily accessible savings
products to all strata of the population. In some countries, savings banks were
created on public initiative; in others, socially committed individuals created
foundations to put in place the necessary infrastructure. Savings banks have kept
their focus on retail banking: payments, savings products, credits and insurances
for individuals or small and medium-sized enterprises. Apart from this retail focus,
they also differ from commercial banks by their broadly decentralized distribution
network, providing local and regional outreach—and by their socially responsible
approach to business and society.

Building societies and Landes banks: institutions that conduct retail banking.
Ethical banks: banks that prioritize the transparency of all operations and make
only what they consider to be socially-responsible investments.

Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks

Investment banks "underwrite" (guarantee the sale of) stock and bond issues,
trade for their own accounts, make markets, and advise corporations on
capital market activities such as mergers and acquisitions.

Merchant banks: were traditionally banks which engaged in trade finance. The
modern definition, however, refers to banks which provide capital to firms in
the form of shares rather than loans. Unlike venture capital firms, they tend
not to invest in new companies.

Universal banks: more commonly known as financial services companies,

engage in several of these activities. These big banks are very diversified
groups that, among other services, also distribute insurance— hence the term
bancassurance, a portmanteau word combining "banque or bank" and
"assurance", signifying that both banking and insurance are provided by the
same corporate entity.

Other types of banks

Islamic banks: adhere to the concepts of Islamic law. This form of banking
revolves around several well-established principles based on Islamic canons.
All banking activities must avoid interest, a concept that is forbidden in Islam.
Instead, the bank earns profit (markup) and fees on the financing facilities that
it extends to customers.