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Research Paper

Management

E-ISSN No : 2454-9916 | Volume : 2 | Issue : 8 | August 2016

FACTORSTHATDETERMINECUSTOMERSATISFACTIONIN BANKINGINSTITUTIONS:EVIDENCEFROMINDIAN BANKINGINDUSTRY Amina I. Nakhuda Asst.Prof.,UCCC, SPBCBA & UACCAIT, Surat. ABSTRACT The banking industry like many other financial service industries is facing a rapidly changing market, new technologies, economic uncertainties, fierce competition and more demanding customers and the changing climate has presented an unprecedented set of challenges. Banking is a customer oriented services industry, therefore, the customer is the focus and customer service is the differentiating factors. In the backdrop of all these developments the investigator makes an attempt to study the determinants of customer satisfaction in Indian banks. For this study, descriptive research design is used where the data is collected through the questionnaire. The information is gathered from the different customers of the two public sector banks, viz., State Bank of India and Bank of Baroda and two private sector banks viz. ICICI & HDFC banks of India located at four metro city viz. Mumbai, Calcutta, Delhi & Chennai. 100 bank respondents from each bank were contacted personally in order to seek fair responses. The collected data were analysed by SPSS package. Introduction The Financial Services is the backbone of service sector. This is important not only for the banking sector but for the Indian economy as a whole. This is so because banking is a catalyst and life of modern trade and commerce. It is an integral part of all the businesses and social activities. This rapid transformation of services in the banking system has led to the evolution of a highly competitive and complex market where there is a continuous refinement of services. Hence the increased role of banking in India's economic development on the one hand and the changes in the business climate on the other has put increased pressure on them. These changes are compelling the banks to reorganize themselves in order to cope with the present conditions. Now, the Financial Institutions are trying to provide all the services at the customer's doorstep. The customer has become the focal point either to develop or maintain stability in the business. Every engagement with the customer is an opportunity to either develop or destroy a customer's faith in the Bank. The expectations of the customers have also increased many folds. Intense competition among the banks has redefined the concept of the entire banking system. The banks are looking for new ways not only to attract but also to retain the customers and gain competitive advantage over their competitors. The banks like other business organizations are deploying innovative sales techniques and advanced marketing tools to gain supremacy. The main driver of this change is changing customer needs and expectations. Satisfaction is an overall customer attitude or behavior towards a service provider, or an emotional reaction towards the difference between what customers expect and what they receive, regarding the fulfillment of some desire, need or goal. In this paper, the main contention of the researcher is to highlight the factors determining customer satisfaction through factor analysis. Research Methodology Objectives of the study: The main objective of this study is to study the factors that underline customers' satisfaction of the banks operating in India. Sample Selection Out of 22 public sector banks & 19 private sector bank listed on BSE in India, The researcher has selected top 2 banks each from public and private sector banks on the basis of market capitalization as on 29/09/2014. Nature of Data Used and Sources of Data: Primary data are used for the study. The data are collected through a structured questionnaire, which was distributed to the customers of respective banks of four cities. These questionnaires were filled up directly from respondents visiting bank. Sample Design: Convenient sampling method is used to collect the data. A sample size of total four hundred customers (200 each from public sector & private sector) are taken from four metro cities (Viz. Delhi, Chennai, Calcutta and Mumbai) of India. Area of Study: The area of study is limited to four metro cities of India and top two public sector & private sector banks of India. The study can be extended for customers across India & Foreign banks.

Review of Literature: Customer satisfaction has been gaining increasing attention from the researchers and practitioners as a recognized field of scholarly study and is a fundamental tool used by financial institutions for enhancing customer loyalty and ultimately organizational performance and profitability. The importance of customer satisfaction cannot be dismissed because happy customers are like free advertising. Many of us have heard of the current trend for businesses to become highly customer-centric, which is to put the customer at the centre of business in terms of strategies, actions and processes. S.Vijay Anand and Dr. M. Selvaraj (2010) found that there is no significant relationship between the demographic variables and customer satisfaction except the choice of the bank and the status of residential area. Mesay Sata Shanka(2012) and Dr. Snehalkumar H Mistry(2013) studied bank service quality, customer satisfaction and loyalty. The research proves that empathy and Responsiveness plays the most important role in customer satisfaction level followed by tangibility, assurance, and finally the bank reliability. Sunayna (2013) studied Service quality versus customer satisfaction in Banking Sector. The findings suggest that improved service quality should be adopted to give maximum satisfaction to the customer. Akanksha Verma (2013) found that the public banks were ahead of the private banks in attracting customers because of good personal relationship with customers. Discussion: Table 1 Classification of Respondents according to Gender Gender of the Respondent

Type of Bank Public

Private

Frequency Percentage Frequency Percentage Male Female

145 55

72.50% 27.50%

161 39

80.50% 19.50%

Total

200

100%

200

100%

From the above table we can clearly say that out of 200 respondents of Public bank, 72.5% are male, and 27.5% are female. Same way we can see that of 200 respondents of Private bank, 80.5% are male, and 19.5% are female. Table 2 Classification of Respondents according to Age Age of the Respondent

Below 30 years 30 to 60 years

Type of Bank Public

Private

Frequency

Percentage

Frequency

Percentage

75 99

37.50% 49.50%

52 122

26.00% 61.00%

Above 60 years

26

13%

26

13%

Total

200

100%

200

100%

From the above table we can say that out of 200 respondents of Public bank, age of 49.5% of respondents is between 30 to 60, age of 37.5% of respondents is less than 30, and age of 13% of respondents is more than 60. Same way in private

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International Education & Research Journal [IERJ]

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Research Paper

E-ISSN No : 2454-9916 | Volume : 2 | Issue : 8 | August 2016

bank also out of 200 respondent age of 61% of respondents is between 30 to 60, age of 26% of respondents is less than 30, and age of 13% of respondents is more than 60. Table 3 Classification of Respondents according to Qualification

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity

Approx. Chi-Square

Type of Bank

Qualification Public

.845 9428.282

Df

465

Sig.

.000

Private

Frequency

Percentage

High School

58

29.00%

52

26.00%

Frequency Percentage

Graduation

119

59.60%

134

67.00%

Post Graduate

15

7.50%

11

5.50%

Professional

8

4.00%

3

1.50%

Total

200

100.00%

200

100.00%

From the above analysis we can see that in public sector banks 29% respondents are having high school education, 59.6% are graduate respondents, 7.5% are post graduate & only 4% are professionals. While in private sector bank 26% respondents are having high school education, 67% are graduate respondents 5.5% are post graduate & only 1.5 % are professionals. Table 4 Classification of Respondents according to Occupation Type of Bank

Occupation Public

Private

In the analysis, 31 variables were analyzed. Bartlett's test of sphericity and Kaiser-Meyer Olkin (KMO) measure of sampling adequacy were used to examine the appropriateness of factor analysis. The approximate chi-square statistic is 9428.282 with 465 degrees of freedom, which is significant at .000 levels. The KMO statistic (0.845) is also large (>0.5) Hence factor analysis is considered an appropriate technique for further analysis of data. Table 9 Communalities Initial

Extraction

My Bank has latest technology

1

0.806

All equipments is my bank are well Maintained

1

0.849

External Appearance of Bank is very pleasing

1

0.784

Branches of my bank are located at ideal places

1

0.769

The operating hours are convenient to all their customers

1

0.817

Frequency

Percentage

Frequency

Percentage

ATM of Bank is at several locations

1

0.844

Student

9

4.50%

8

4.00%

Bank has enough sitting arrangements

1

0.635

Bank provides speedy services

1

0.828

Banks have enough variety of products and services

1

0.734

Service

107

53.50%

100

50.00%

Business

57

28.50%

65

22.50%

Profession House wives

12 15

6.00% 7.50%

10 17

5.00% 8.50%

Total

200

100%

200

100%

Above analysis reveals that in public sector bank 4.5% respondents are students, 53.5% are doing jobs, 28.5 are businessmen, 6% profession & 7.5% are housewives. While in private sector banks 4% respondents are students, 50% are doing jobs, 22.5 are businessmen, 5% profession & 8.5% are housewives.

Annual Income

0.883

1

0.825

It is easy to obtain new loan

1

0.599

Bank provides Home Banking Facility

1

0.766

Banks have their customers' best interest at Heart

1

0.697

Banks performs the service right the first time

1

0.725

Banks keep accurate records

1

0.698

When a customer has a problem, they show a sincere interest in solving it

1

0.799

Employees give customers personal service

1

0.783

The employees understand the specific need of their customer

1

0.818

Employees give prompt service to customers

1

0.729

Total

Employees are always willing to help Customers

1

0.82

Employees make information easily obtainable to customers

1

0.859

Employees are polite with customers

1

0.803

Employees of Banks have the knowledge to answer customers questions

1

0.765

The behaviour of employees in stills confidence in customer

1

0.667

Customers feel safe in their transactions with employees in the Bank

1

0.781

Bank has a strong reputation and good image in the community

1

0.692

9.00%

14

7.00%

Total

200

100.00%

200

100.00%

Percentage 54.50% 38.50%

The above analysis reveals that in public sector banks 55.5% respondents are having income below 5 lacs, 35.5% are having between 5 to 10 lacs & 9% are having above 10 lacs. While in private sector 54.5% respondents are having income below 5 lacs, 38.5% are having between 5 to 10 lacs & 7% are having above 10 lacs. Table 6 Classification of Respondents According to City

SBI

BOB

Delhi

25

25

25

25

100(25%)

Chennai

25

25

25

25

100(25%)

Mumbai

25

25

25

25

100(25%)

Calcutta

25 100(25%)

25

25 100(25%)

25 100(25%)

100(25%)

100(25%)

1

It is easy to open a new account

18

Total

Bank offers loan at lower rate of interest

0.643

Above 10 lacs

City

0.762

0.843

Below 5 Lacs 5 to 10 lacs

Private HDFC ICICI

1

1

Frequency 111 71

Public

0.596

1

Private

Percentage Frequency 55.50% 109 35.50% 77

1

Bank charges low service charges

Type of Bank Public

Banks provide online banking services Bank offers high rate of return on investment on deposits

Bank provides different banking cards Table 5 Classification of Respondents according to Income

400 (100%)

From the above table it is seen that 25percentage of respondents are taken from each city and bank. Factor Analysis Table 7 Reliability Statistics Cronbach's Alpha

Cronbach's Alpha Based on Standardized Items

N of Items

.900

.904

31

7

Table 8 KMO and Bartlett's Test

Extraction Method: Principal Component Analysis.

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Research Paper

E-ISSN No : 2454-9916 | Volume : 2 | Issue : 8 | August 2016 Initial Eigen values

Component

Extraction Sums of Squared Loadings

Rotation Sums of Squared Loadings

Cumulative % 30.309 42.437

Total 9.396 3.759

9.574

52.011

2.968

9.574

52.011

3.110

10.032

7.091

59.102

2.198

7.091

59.102

2.800

9.033

49.211

1.585 1.404

5.113 4.529

64.215 68.744

1.585 1.404

5.113 4.529

64.215 68.744

2.540 2.443

8.192 7.879

57.403 65.282

7 8

1.208 1.101

3.895 3.550

72.639 76.189

1.208 1.101

3.895 3.550

72.639 76.189

1.770 1.611

5.711 5.196

70.993 76.189

9

.759

2.450

78.639

10

.725

2.337

80.976

11

.693

2.237

83.213

12

.558

1.801

85.014

13

.528

1.703

86.717

14 15

.503 .432

1.623 1.393

88.341 89.733

16

.375

1.210

90.943

17

.326

1.053

91.996

18

.314

1.012

93.008

19

.267

.862

93.870

20

.234

.754

94.624

21

.222

.715

95.338

22

.203

.655

95.993 96.574

1 2

Total 9.396 3.759

% of Variance 30.309 12.127

3

2.968

4

2.198

5 6

23

.180

.581

24

.168

.541

97.115

25 26

.154 .150

.497 .483

97.612 98.095

27 28 29

.144 .121 .118

.465 .389 .381

98.560 98.949 99.330

30

.107

.344

99.674

31

.101

.326

100.000

% of Variance Cumulative % 30.309 30.309 12.127 42.437

Total 5.784 3.561

% of Variance Cumulative % 18.657 18.657 11.488 30.145 40.177

Extraction Method: Principal Component Analysis. prompt service to customers.)

Findings: Retaining only the variables with Eigen values greater than one (Kaiser's criterion) and loading greater than 0.4, we can infer that: Ÿ

30.309% of variance is explained by factor 1- Assurance (The employees understand the specific need of their customer, Employees give customers personal service, Employees of Banks have the knowledge to answer customers questions, Banks have their customers' best interest at heart, The behaviour of employees instills confidence in customers, Banks performs the service right the first time, It is easy to obtain new loan & Employees give

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Ÿ

12.127% of variance is explained by factor 2- Physical Aspect (It is easy to open a new account, Bank provides speedy services, Branches of my bank are located at ideal places & External Appearance of Bank is very pleasing)

Ÿ

9.574% of variance is explained by factor 3- Approachability & Ease of contact (Employees are always willing to help customers, Employees make information easily obtainable to customers, Bank has a strong reputation and good image in the community, Employees are polite with customers & Customers feel safe in their transactions with employees in the Bank)

Ÿ

7.091% of variance is explained by factor 4- Convenience (ATM of Bank is at several locations, The operating hours are convenient to all their customers & Bank provides Home Banking Facility)

Ÿ

5.13% of variance is explained by factor 5- Competence (All equipments in my bank are well maintained & My Bank has latest technology )

Ÿ

4.529% of variance is explained by factor 6- Wide Range of Products and Services (Bank provides different banking cards, Bank has enough sitting arrangements, Banks provide online banking services & Banks have enough variety of products and services )

Ÿ

3.895% of variance is explained by factor 7- Reliability (Bank offers loan at lower rate of interest, Bank offers high rate of return on investment on deposits & Bank charges low service charges)

Ÿ

Lastly 3.550% of variance is explained by Factor 8- Accuracy (Banks keep accurate records)

Together, all the factors contributed to 76.189% of variance. Factor loadings are

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Research Paper

E-ISSN No : 2454-9916 | Volume : 2 | Issue : 8 | August 2016

very high in case of all factor (all 31 variables have factor loading >0.4), all variables we kept in factor analysis. Conclusion and Suggestions: In today's competitive environment, customer satisfaction has recognized as an essential role for survival and success in the market. Needless to say, numerous research had been conducted to know what customer satisfaction meant and for that various survey items were developed. In this respect, this research exposed that the main determinants of Customer Satisfaction in Indian Bank are Assurance, Physical Aspect, Approachability and ease of contact, Convenience, Competence, Wide range of products and services, Reliability and Accuracy. This research effort has also practical implications for banks to improve customer services for achieving their objective of customer satisfaction. Service organizations like banking sector should try to develop strategies which enhance positive behavioral responses for to customer satisfaction and prohibit negative ones. These strategies may include meeting with the clients to determine the customers' desired-service levels, avoid problems in services, dealing effectively with dissatisfied consumers and tackle customer complaints positively. REFERENCES: 1.

Akanksha Verma (2013) Studied “Study The Level Of Customer Satisfaction With Customer Relationship Management Of Public Sector Banks And Private Sector Banks.” In Journal Of Asian Research Consortium, Volume 3, Issue 8,ISSN: 2249-7323.Pg. No.62

2.

Mr. Pal Ashishprasad (2013) Studied “A Comparative Study Of Customer Satiafaction Tword Banking Services Of Selected Private & Public Bank: A Study On Servqual.” In Journal Of Asian Researc H Consortium,Volume 3, ISSN: 2249-7307 Pg. No. 152 .

3.

Dr. Jyoti Agarwal (2012) Studied, Customer Satisfaction In Indian Banking Services (A Study In Aligarh District, Far East Journal of Psychology and Business, Vol. 6 No. 3 March 2012, Pg.no. 36-55.

4.

Sunayna (2013) studied, Service Quality versus Customer Satisfaction in Banking Sector. International Journal of Business and Social Science , Vol. 4 No. 10 [Special Issue – August 2013,Pg.No.49-56]

5.

S. Vijay Anand and Dr. M. Selvaraj(2012) Impact of Demographic Variables on Customer Satisfaction in Banking Sector – An Empirical Study ,International Journal of Scientific and Research Publications, Volume 2, Issue 5, May 2012 1 ISSN 2250-3153

6.

Mesay Sata Shanka(2012) Volume 3, Issue 7 Research Consortium 152

7.

Dr. Snehalkumar H Mistry(2013) IRJC International Journal of Marketing, Financial Services & Management Research Vol.1 Issue 10, October 2012, ISSN 2277 3622

8.

S.Sivesan and Zenith (2013)International Journal of Multidisciplinary Research ,ISSN 2231-5780,Vol.3(8)

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ISSN: 2249-7307,Journal of Asian

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FACTORS THAT DETERMINE CUSTOMER SATISFACTION IN BANKING INSTITUTIONS: EVIDENCE FROM INDIAN BANKING I