Service Quality Significance in Banking Industry with Reference to India

Service Quality Significance in Banking Industry with Reference to India

Alok Satishchandra Mittal (Acropolis Technical Campus, India) and Sunita Jatav (Institute of Business Management and Research, India)
DOI: 10.4018/978-1-5225-0143-5.ch018
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This research tried to investigate consumer expectations and perceptions about elements of service quality of most used public, private and foreign banks in Indian context and actual services received by the customers. Apart from service quality this research tried to analyze the best bank in terms of benchmarking, which they follow because every time requirements of customers are changing but according to changing customer expectations what steps banks should take during services was also analyzed in research. Data was analyzed by taking expected – perceived /actual services and gap was determined between both of them. Impact of benchmarking and service quality towards expected and actual services was thus found out with regards to the service quality model concerning the influences of perceived service quality.
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1. Introduction Of Service Sector

Service sector in India as well as at global level have emerged as fastest growing sector. The services sector has been the key driver of growth of the Indian economy in the past decade, during which India has ranked among ten fastest growing economies in the world, with average economic growth at over 7 per cent a year, and over 8 per cent in the last five years. During the 1990’s, India’s services sector grew at an average annual rate of growth 9 per cent, well ahead of the growth of industry at 5.8 per cent per annum and that of agriculture at 3.1 per cent per annum. The most important services in the Indian economy have been banking and financial services. They are one of the largest and most challenging sectors and hold a key to the country’s overall progress. Industries and Services have acted as twin engines propelling overall growth in Indian economy. They are attracting large inflow of capital and foreign investments into the country from all over the world. These sectors are the largest generator of employment opportunities in the country and a facilitator of trade and commerce with other countries. In other words, besides agriculture, they are the basis of almost all major policy initiatives, incentives and schemes as well as programs and plans, both at National and at the State level. Services have become a strong force now-a-days. Of service sector, the banking services play a vital role to satisfy the varied requirements of customers, taking care of the government on one side and the public on the other. Banks, either public sector banks, private sector banks are foreign sectors banks are highly competitive with each other with their own agenda of attaining their objectives and targets.

Services sector has become imperative for many economies in the world with India also not being an exception to this fact. While for the medium and long term, it is significant to achieve faster growth of industrial sector mainly composed of manufacturing sector to catch up with the growth of services sector and maintain a decent and secure growth of agricultural sector, which is still subject to the vagaries of nature. In the short and even medium term, the sure bet for higher growth of the Indian economy lies in further accelerating the growth of the services sector, which can be done with extensive ease as compared to other sectors.

A starting point for understanding which interpretation is correct is to look more closely at what activities dominate the sector’s recent growth. It differentiates three groups of services. Group I constituting the traditional services – retail and wholesale trade, transport and storage, public administration and defense – which tend to be slow growing in the way their share in Gross Domestic Product (GDP) has fallen in more advanced countries.

Group II is a fusion of traditional and modern services consumed mainly by households – education, health and social work, hotels and restaurants, and other community, social and personal services – whose share in GDP has risen in step with increase in per capita income. Group III is made up of contemporary services – financial intermediation, computer services, business services, communications, and legal and technical services – whose share in GDP in The Organization for Economic Co-operation and Development (OECD) countries has risen significantly fatter than per capita income.

In case of Indian economy, service-sector growth is extensive across all the activities. But the highest growing activities are business services, communication and banking, all of which are part of services. Business services include computer-related services, machinery rental, research, and accounting, legal and technical services. Computer services, which accounted for more than four-fifths of business services in 2008-09, are the single fastest-growing member of this group. Financial services include banking and insurance, with banking being the largest and fastest growing. But there are also other rapidly growing service sectors like hotels, restaurants, education, health, trade and transport.

Eichengreen and Gupta (2010) in their study on growth of service sector have concluded that the service sector has not only been able to generate substantial employment but at the same time it has also witnessed the mix of skilled-unskilled labor and has become analogous to that of manufacturing sector. Therefore, the service sector is also equally responsible for the vast majority of the Indian labor moving into the modern sector. Table 1 highlights the top ten sectors of services attracting highest Foreign Direct Investment (FDI) equity inflows in India.

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