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COMPARISON BETWEEN INDIAN BANK &

HDFC BANK ON SERVQUAL MODEL

SUBMITTED TO PROF. S.PANDA

IMIS

SUBMITTED BY

Parashar saha dm o91

Arijit roy dm 005

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CONTENTS:

page

Introduction.

Models of banking service

quality.

Tools for evaluation of

service quality

Conceptual framework

Hypothesis to testing

Research methodology.

Sample selection

Finding & suggestions

Acknowledgement

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Without the help form the MANAGER OF HDFC BANK &

INDIAN BANK our project would have not been completed

successfully

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

INDIAN BANK who co-operated with us honestly.

The really cool thing is that we took the data from both the

bank’s customer & matched it whatever we have got during

taking their interview of 2-3 minutes we noticed the

reflextion of words into the answer of the questionarie.

Project Goal - compare the service quality between

INDIAN BANK & HDFC BANK

Project Development Process:

• Study of servqual

• Design Concepts

• response through questionire

• analysis & Interpretation

Brief Description of Banking System in India

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There are basically four categories of banks such as Public

Sector Banks, Private Banks, Foreign Banks and Cooperative

Banks operating in India that are regulated by Reserve Bank of

India (RBI). Besides, there are some subsidiaries of public

sector and cooperative banks that are operating in the

different parts of the country. The major Public Sector banks

are State Bank of India, Allahabad Bank, Andhra Bank,Indian

Bank, UCO Bank and United Bank of India. The Private Banks

include ICICI Bank, HDFC Bank and UTI Bank. The important

foreign banks that are operating in India are HSBC, Citibank

and ABN-AMRO Bank.

Today Banks are providing various services apart from the

traditional Banking services.In this competitive scenario it is

very vital for a Bank to provide excellent quality services to

remain competitive and hold a advantage over others.

In our study we are going to have a comparative analysis

between HDFC and INDIAN Bank based on SERVQUAL Model.So

it is better to know about them and their services.

HDFC BANK

HDFC Bank was incorporated in August 1994, and, currently

has an nationwide network of 1412 Branches and 3275 ATM's

in

528 Indian towns and cities. The Housing Development Finance

Corporation Limited (HDFC) was amongst the first to receive

an 'in principle' approval from the Reserve Bank of India (RBI)

to set up a bank in the private sector, as part of the RBI's

liberalisation of the Indian Banking Industry in 1994. The bank

was incorporated in August 1994 in the name of 'HDFC Bank

Limited', with its registered office in Mumbai, India. HDFC Bank

commenced operations as a Scheduled Commercial Bank in

January 1995.

Their single-minded focus on product quality and service

excellence has helped us garner the appreciation of both

national and international organizations.

The merger of Centurion Bank of Punjab Ltd (CBoP) with HDFC

Bank

Limited became effective on May 23, 2008 as per the order of

Reserve

Bank of India (RBI), with April 1, 2008 as the appointed date

FINANCIAL RESULTS:

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Profit & Loss Account: Quarter ended December 31, 2008 The

total income for the bank for the quarter ended December 31,

2008 grew by 58.8% over the corresponding quarter ended

December 31, 2007 to Rs. 5,407.9 crores. Net revenues (net

interest income plus other income) were Rs. 2,918.6 crores

for the quarter ended December 31, 2008, an increase of

37.9% over Rs. 2,116.5 crores for the correspondingquarter

of the previous year. Interest earned (net of loan origination

costs and amortization of premia on investments held in the

Held to Maturity (HTM) category) increased from Rs. 2,726.9

crores in the quarter ended December 31, 2007 to Rs. 4,468.5

crores in the quarter ended December

31, 2008, up by 63.9%. Net interest income (interest earned

less interest

expended) for the quarter ended December 31, 2008 increased

by 37.7% to Rs. 1,979.3 crores, driven by average asset

growth of 44.1% and a net interest margin (NIM) of around

4.3% for the quarter ended December 31,

2008.

The products offered by HDFC BANK are :

Accounts & Deposits

Savings Accounts

Current Accounts

Fixed Deposits

Demat Account

Safe Deposit Lockers

Loans

Personal Loans

Home Loans

Two Wheeler Loans

Cards

Credit Cards

Debit Cards

Prepaid Cards

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Investments & Insurance

Forex Services

Payment Services

Access Your Bank

Models of Banking Service Quality

Based on the models of organizational effectiveness and

institutional

effectiveness, seven models of Banking Service quality have

been proposed in the literature to illustrate the different

concepts that can be used to deepen understanding of

Banking Service quality and develop management strategies

Each of these models deals with the different key areas for

evaluation of quality.These are :

1.Goal and specification model

2.Resource – input model

3.Process model

4.Satisfaction model

5.Legitimacymodel

6.Absence of problem model

7.Organizational learning model

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

been considered here to evaluate the Banking quality because

variation of satisfaction level among the Customers can be

accounted for.

According to this model, Banking quality is defined as the

satisfaction of Customers of an Banking institution for its

survival. The Banking quality should be determined by the

extent to which the performance of an Banking institution can

satisfy the needs and expectations of its Customers. Banking

Service quality primarily depends on the expectations and

perceptions of Customers. Therefore, it is difficult for all

institutes to achieve it and satisfy the needs of all the

Customers. Furthermore, the objective evaluation of quality

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achievement is often technically difficult and conceptually

controversial.

Therefore, satisfactions of Customers are frequently used

instead of

some objective indicators as the critical element to assess

quality in Banking institution.

For the present research, two important indicators of

Banking Service quality we have taken are low income and High

income Customers.

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

instrument, that supports qualitative analysis with

quantitative information are still popular among researchers

as far as assessment of service quality is concerned and have

been applied to different service sectors.The instrument uses

five core criteria (dimensions) consisting of twenty-two pairs

of components evaluated in a seven point Likert-type scale

under which customers decide in evaluating the service

quality. The first twenty-two items are designed to measure

customer’s pre-purchase expectations for a particular service

and the other twenty-two items are provided to measure

perceived level (perceptions) after delivery of a service.

Tools for Evaluation of Service Quality

Quantitative measurement of service quality is extremely

difficult because of the involvement of human behavioral

aspects and the absence of precise numerical data. Some of

the approaches of service quality measurement are outlined as

follows:

1. Statistical analysis

2. Artificial Neural Networks (ANN)

3. Machine learning techniques such as genetic algorithms and

fuzzy

logic

4. Rough Set

5. Analytical Hierarchy Process

6. Quality Function Deployment (QFD)

7. Data Envelopment Analysis (DEA)

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8. Taguchi Method

9. Decision trees

10.Data visualization

Artificial Neural Networks (ANN) has been a very effective

approach employed by many studies for the evaluation of

‘Satisfaction Model’ because it is frequently applied in the

literature for modeling the human decision-making process

since it is considered to be the brain metaphor of human

judgments. It is a potential technique to predict an output,

classify a given inputs into a groups (pattern recognition) and

incorporates the criteria.It can also exploit and represent the

nonlinear relationship between the customer satisfaction and

their perception of the service that are the key elements for

evaluation of the service such as banking sector.In earlier

research ANN has been applied to evaluate the service quality

considering four performance models (P-E, P-only, E-P and E&P)

for customer satisfaction using their expectations and

perceptions of the service.It was found P-E model will be an

appropriate one in bankig sector.So we have used P-E model in

our study

Usually, four models such as perception minus expectation gap

(P-E gap), expectation minus perception gap (E-P gap), perception-

only (P-only), and expectation and perception (E&P) models are

used to predict service quality. However, performance of

various models in relation to predictive power of service

improvement widely differs depending on various

application.The deviations in obtaining the best model of

service quality are due to the fact that the quality of service

varies from one sector to another. For example, the

components of quality in a fast food restaurant are very

different from those on a railway or a bank or a holiday

resort. Therefore, quality of service is much difficult to

define precisely because service provider generally provides

utility, not objects, as in case of manufacturing sector. The

diverse components of service sector make its quality control

and improvement more difficult to generalize. The service

quality items in the banking sector largely differ that from

the auto-dealer network, financial or transportation sector.

Thus, neural network models, when tested in a different

service sector with different survey items, may indicate

significantly different results.

There are 4 different models available

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Model-I (P-E gap model): In this network model, the input is

defined using the traditional SERVQUAL-based gap that means

perceptions of customers minus the expectations.This

resulted in twenty-two input nodes, a hidden layer and an

output layer consists of one node representing the overall

evaluation of service quality.

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

gap had raised concern among the researchers due to its low

reliability. It is argued that perceptions of the customer are

more important than the gap between their perceptions and

expectations.

Therefore, a service quality measuring instrument known as

‘SEVPERF’

considering only the perceptions of the customers is

suggested by the researchers.In this model, only customer

perceptions are used as input.

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

customers enter a service situation with some expectations

.These expectations are formed either by previous experiences

of the same or similar service, or simply expectations

generated by customer independently. So customer usually

undertakes a service experience with some preconceived

expectations and thereafter develops a perception of that

experience.

Hence, service quality could be measured as expectations

minus perceptions or E-P gap. A positive E-P score implies that

customer

expectations are more than the perceptions of the customer

i.e. the

expectations of customers are not met whereas a negative

score in this gap indicates the delighted customer. The values

of gap for the twenty-two items of SERVQUAL can be used as

the input data for this model.

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

accepted as a part of the service experience but their exact

role in the overall evaluation of service quality is still

controversial.Therefore, the interactions of expectations

and perceptions independently may be considered without a

predefined relationship between them.

In our comparative study between HDFC and INDIAN BANK ,we

have used P-E gap model for the analysis and evaluation of

service quality in banking sector with the input data such as

customer expectations, perceptions and the gaps.

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The Conceptual Framework

To understand the characteristics of service quality in

general and service quality in banking in particular,

discussions on various aspects of the customer satisfaction

in relation to the traditional Banking service quality is

necessary. Widespread literature survey discussed suggests

various authors have pointed out several Banking service

dimensions. The most common dimensions of banking for

evaluation of customer perceived service quality banking from

the literature are Tangibility,Reliability,

Responsiveness,Assurance and Empathy.

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

measure banking service quality and to create useful quality-

assessment tools. It includes all SERVQUAL five dimensions

(Othman, et al., 2001) that consist of 22 questions. Both

models define customer satisfaction as perceived service

quality, which is the gap between expected service and

perception of service actually received.

The RATER may finally provide the following benefits to the

Indian banks:

1. It is the first approach to add and mix the customers’

religious beliefs and cultural values with other quality

dimensions.

2. It provides for multi-faced analysis of customer

satisfaction.

3. It links quality with customers’ satisfaction and service

encounter.

4. It provides information at several levels, already organized

into meaningful groupings.

5. It is a proven approach, which results in usable answers to

meet customers’ needs.

6. It is empirically grounded, systematic and well documented.

Even more Indian bank should learn how to prioritise these

factors according to their cultures, current situations and

the availability of resources.Banks managers can use the

RATER model and its dimensions first to identify the following

issues:

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1. To identify those areas where improvement should be made

and resources can be allocated. For instance, they need to

know the level of quality in their banks and they can

manipulate to make bank-wide improvement in quality

performance. Also they can use benchmarking to compare

their performance and other banks’, which have already

implemented quality program that will help to prioritise the

quality management efforts.

Tangibility : This dimension deal with modern looking

equipments and visual appealing part of banks.

Reliability: This dimension has a direct positive effect on

perceived service quality and customer satisfaction in banking

institutions.Banks must provide error free service and secure

online transactions to make customers feel comfortable.

Responsiveness: Customers expect that the banks must

respond their inquiry promptly.Responsiveness describes how

often an bank

voluntarily provides services that are important to its

customers.Researchers examining the responsiveness of

Banking services have highlighted the importance of perceived

service quality and customer satisfaction.

Assurance; Customer expect that the bank must be secured

and the behaviour of the employees must be encouraging.

Empathy ; individual attention,customized service and

convenient banking hours are very much important in todays

service.

In order to achieve better understanding of service quality in

banking sector, the proposed five service quality dimensions

are conceptualized to illustrate the overall service quality

of the banking in relation to customers’ and providers’

perspective.

Tangibility

Reliability

Responsiveness

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Fig 1.1 The Research Framework

The five dimensions of banking service quality have been

indicated with respect to customer’s and banker’s perspective.

The relationship

between customer satisfaction and the service are also

mentioned in the Figure 1.1. Basically, service quality in

banking can be viewed from both customers’ perspectives and

bankers’ perspective. From the customers’ perspective, service

quality is the perceived quality. From the bankers’ perspective

there are targets and delivered quality. However, bankers are

first required to understand the attributes that are

significant for the customers’ satisfaction to judge the

service quality for enhancing banking service.

Basically, service quality in banking can be viewed from two

perspectives:

• customer perspective

• bank perspective

Customer perspective

From the perspective of the customer, the service quality

differentiates sought quality and perceived quality. Sought

quality is the level of quality customers explicitly or

implicitly demand and expect from service providers. The

sought quality (customer expectations) is

created due to several factors – primarily, the expectations

are formed during a previous personal experience of a

customer with a service, and the customer is influenced by the

experiences of the other users and by the image of an

Assurance

Empathy

Customer

perspective

Customer

Satisfaction

Banking

services

Banking

Service

Quality

Banker’s

perspective

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organisation. Perceived quality means the overall impression a

customer has and experiences about the level of quality

after service realisation. The potential difference between

the sought quality and the perceived quality gives the service

provider an opportunity to measure customer satisfaction

based on formulating the precise and actual criteria

according to which the customers are assessing the services.

Providers perspective

From the provider perspective, there are target quality and

delivered quality. The focus of process- or supply-led quality

definition is rather internal than external, and it is defined as

conformance to requirements. It lays emphasis on the

importance of the management and the supply-side quality, and

there is an important role of the process in determining

the quality of outcome (Ghobadian, 1994). Achieving the

quality of conformance between the planned (target) quality

level and the real quality delivered to customers depends on

the service quality management system in an organisation.

Hypothesis to Test

With the stiff competitions in banking industry, it is apparent

that the service providers need to provide customers with high

standard services. To achieve this goal, the bankers are first

required to understand the attributes that are used by

customers to evaluate the service quality. Therefore, the main

purpose of this study is to gain a better understanding of how

each of the dimensons affects service quality in the banking

sector. The following proposition appears to be significant.

1. The dimensions reflecting service quality in banking is

significantly

related to each other.

.

2.. The dimensions significantly determine the customer

satisfaction in banking.

Research Methodology (Survey Design)

The questionnaire consists of three parts.The first part

consists of 2 questions concerning the demographic

information of the respondents such as Age & Income. The

second part consisting of twenty-two questions exploring the

respondent’s perception about the service quality of banking.

The third part consisting of twenty-two questions exploring

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the respondent’s expectation about the service quality of

bank. We have also taken some suggestions from the

respondents.

These questions have been organised under the proposed

framework based on the SERVQUAL model.

Earlier studies on evaluation of service quality of banks had

used dimensions of services quality as Tangibility, Reliability,

Responsiveness, Assurance and Empathy.So in our study we

have used the same five dimensions.

Sample Selection

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

two retail branch of HDFC AND INDIAN BANK in

Bhubaneswar.The collection of data was done during

April,2009. Non-Probabilistic sampling method has been

employed in this study. The most common type of non-

probabilistic sampling method which is applied in this study is

‘convenience sampling’ through which we had selected the

sample members who can provide required information and

available to participate in the study.

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

HDFC BANK

0

1

2

3

4

5

6

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

QUESTIONS

ME

AN

PERCEIVED

15

INDIAN BANK

0

1

2

3

4

5

6

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

QUESTIONS

ME

AN

PERCEIVED

HDFC BANK

4.2

4.4

4.6

4.8

5

5.2

5.4

5.6

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

QUESTIONS

ME

AN

EXPECTED

16

INDIAN BANK

4

4.2

4.4

4.6

4.8

5

5.2

5.4

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

QUESTIONS

ME

AN

EXPECTED

SERVQUAL SCORE

DIMENSIONS HDFC

RAN

K

INDIAN

RAN

K

BANK

TAGIBLES (0.42) 2ND

(1.38)

1ST

RELIABILITY (0.32) 3RD

(0.67)

4TH

RESPONSIVENESS (.45) 1ST (1.02)

2ND

ASSURANCE (.02) 5TH

(0.38)

5TH

EMPATHY (0.29) 4TH

(0.95)

3RD

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PERCEIVED

0

1

2

3

4

5

6

1 2 3 4 5

DIMENSIONS

ME

AN HDFC

INDIAN BANK

FINDINGS AND SUGGESTION

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

should focus on promt service, employees should be willing

to help the customers and say the exact time when the services

will be performed.

2.customer expectations regarding visual appealing of HDFC

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

gap.

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

gap score is negative.

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

very confidence and feel safe while transacting with the bank.

5.Physical facilities and modern looking equipment are not

sufficient in Indian bank.

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6.As compared to HDFC Indian bank are not able to provide

prompt service to their customers.

7.The present customized service and convenient operating

hours are not sufficient to meet the expectations of the

customers.

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

provider in all the dimensions.