INTRODUCTION

What is SERVICE GAP?

Today’s customer has become increasingly demanding. They not only want
high quality products but they also expect high quality customer service. Even
manufactured products such as cars, mobile phone and computers cannot
gain a strategic competitive advantage though the physical products alone.
The customer gap is the difference between customer expectation and
customer perceptions. Customer expectation is what the customer expects
according to available resources and is influenced by cultural background,
family lifestyle, experience with products and information available online.
Customer perception is totally subjective and based on the customer’s
interaction with the product or service. Perception is derived from the
customer’s satisfaction of the specific product or service and quality of the
service delivery.

The difference between what customer expected and what they perceived
was delivered and extended. Researchers adopted their framework to identify
a total of seven types of gaps that can accrue at different point during the
design and delivery of a service performance.

The research model consists of two sections i.e. Perception and Expectation.
Both sections have five dimensions as Tangibles, Reliability, Responsiveness,
Assurance and Empathy. Perceived Service Quality is the difference between
Perception and Expectation (P-E). There are also five gaps between each
dimensions of service quality
i.e. Tangibles Gap= Perceived Tangibles – Expected Tangibles, Reliability
Gap = Perceived Reliability- Expected Reliability, responsiveness Gap=
Perceived Responsiveness – Expected Responsiveness, Assurance=
Perceived Assurance – Expected Assurance and Empathy = Perceived
Empathy– Expected Empathy.

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CHARACTERISTICS OF SERVICE:

1. Intangible.

Services are intangible. Unlike physical product they cannot be seen, tested,
felt, heard or smelled before they are bought.

Suppose a bank wants to position itself as the “Fast” bank. It could tangibles
this positioning strategy through a number of marketing tools.

 place
 people
 equipment
 communication material
 price

2. Inseparability

Services are typically produced and consumed simultaneously. This is not

true of physical goods, which are manufactured, put in to inventory, distributed
through multiple resellers and consumed later. If a person renders the service
then the provider is a part of service.

Because the client is also present as the service is produced, provider-client

interaction is a special feature of service marketing. Both provider and client
affect the outcome. Several strategies exist for getting around the shortage of
time problem: the service

2provider can learnt to work with larger groups. The service provider can learn
to faster. The service organization can trained more service providers and
build up client confidence.

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3. Variability

Because the services depend on who provides them and when and where
they are provided, services are highly performing ascertaining operations,
other are less successful.

THREE STEPS TOWARDS QUALITY CONTROL:

 Investing in good hiring and training producers.

 Standardizing the service performance process throughout the
organization.
 Monitoring customer satisfaction through suggestion and complaint
system, customer surveys and comparison-shopping.

4. Perishability

Services cannot be started. The perish ability of services is not a problem

when demand is steady. When demand fluctuates, service firms have
problems. For example: public transportations companies have to own much
more equipment’s because of rush- hours demand than if demand were even
throughout the day.

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What is SERVPERF scale?

To measure customer satisfaction with different aspects of service quality,

Valarie Berry in 1985 developed a research instrument. The research
identified five specific dimensions of service performance.

These dimensions represent how consumers organize information about

service quality of specific company in their mind.

In these research respondents are subsequently asked to record their

perceptions of specific company whose services they have used. When
perceived performance ratings are lower than expectations, this is a sign of
poor quality. The reverse indicates good quality.

In 1988 the researchers described scales to measure five dimensions. They

labeled their scales SERVQUAL.

This model was applicable to banking, retailing, insurance, appliance repair &
maintenance, Security brokerage, long- distance telephone service,
automobile repair service etc.

SERVPERF Model includes following dimensions:

 Tangibles
 Reliability
 Responsiveness
 Assurance
 Empathy
1. Tangible: (Representing the Service Physically)

Tangibles are defined as the appearance of physical facilities, equipment,

personnel, & communication materials. All of these provide physical
representations of the service that customers will use to evaluate quality.
Service companies to enhance their image, & provide single quality to
customers use tangibles.

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 2. Reliability: (Delivering on promises)

Reliability is defined as the ability to perform the promised service accurately.

In other words reliability means company promises about delivery, service
provision, problem resolution, & pricing.

3. Responsiveness: (Being willing to help)

Responsiveness is the willingness to help customers & to provide prompt

service. This dimension emphasizes attentiveness & promptness in dealing
with customer request, questions, complaints, & problems. Responsiveness
also includes flexibility & ability to customize the service to customer needs.

4. Assurance: (Inspiring trust & confidence)

Assurance is defined as employees’ knowledge & courtesy & the ability of the
firm & its employees to inspire trust & confidence. This dimension is likely to
be particularly important for the service that customer perceives as involving
high risk &/or about which they feel uncertain about their ability to evaluate
outcomes.

5. Empathy: (Treating customers as individual)

Empathy is defined as the caring, individualized attention the firm provides its
customers. The essence of empathy is conveying, through personalized
service, that customers are unique & special.

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 2 INDUSTRY PROFILE

2.1GLOBAL LEVEL SCENARIO OF BANKING INDUSTRY

The concept of Globalization infers that the globe is a single unit which
function as one when it comes to decision -making. In other words,
Globalization implies the free movement of goods, services and capital
throughout the world. Globalization involves the opening up of national
economies to global markets. Many Socialists define Globalization as a
primarily economic phenomenon, which involves increasing interaction and
integration of national economic system. This leads in turn to growth in
international trade, investment and capital flows. With the advent of
instantaneous communication, knowledge, trade and culture can be shared
around the world simultaneously. This will ultimately result in an increase in
international trade, investment and capital flows.

Due to Globalization, all important institutions like the nation, state, family,
work, services, trade, leisure, culture, knowledge etc. are changing. As a
result of this, life styles of people throughout the world are also changing,
making the world a single unit when it comes to decision making.

The arrival of foreign and private banks with their superior, sophisticated
technology –based services forced Indian Banks also to follow the same by
going in for the latest technologies so as to meet the threat of competition and
retain their customer base. This also brought in revolutionary products and
services which have been orchestrated by the Indian Software Industry.

Software Packages for Banking Applications in India had their beginnings in

the mid 80”s. This move was spurred on by RBI and the Raghuramarajan
committee Report which decided to computerize the Indian Banking branches
in a limited manner. This move was aimed at promoting competition and
allows an easy assessment of relative vendor capabilities. Gradually, even
those who opposed computerization in government and banks changed their
perspective and within a few years our country became a superpower in
information technology.

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The early 90s saw a fall in hardware prices and the advent of cheap and
inexpensive but high-powered PCs and servers. Banks went in what was
called Total Branch Automation (TBA) Packages.

The entire banking sector has undergone a restructuring during recent years
as a result of recent developments. New technologies have added to the
competition. The I-T revolution has made it possible to provide ease and
flexibility in operations to customers thus making life simpler and easier.
Rapid strides in information technology have, in fact, redefined the role and
structure of banking in India. Further, due to exposure to global trends after
information explosion led by Internet, customers – both Individuals and
corporate – are now demanding better services with more products from their
banks. The financial market has turned into a buyer’s market. Banks are also
coping and adapting with time and are trying to become one –stop financial
supermarkets. The market focus is shifting from mass banking products to
class banking with introduction of value added and customized products.

Public Sector Banks like SBI have also started focusing on this area. SBI
plans to open 100 new branches called Personal banking Branches (PBB)
this year. The PBBs will also market SBI’s entire spectrum of loan products:
e.g. housing loans, car loans, personal loans, consumer durable loans, loans
against shares and financing against gold.

The bank of the future has to be essentially a marketing organization that also
sells banking products. New distribution channels are being used; more &
more banks are introducing services like disbursement and servicing of
consumer loans, Credit card business. Direct Selling Agents (DSAs) of
various banks go out and sell their products. They make house calls to get the
application from filled in properly and also take your passport –sized photo.
Home banking has already become common. Now, you can order a draft or
cash over the phone or internet and have it delivered home. ICICI was the first
among the new private banks to launch its net banking service, called Infinity.
It allows the user to access account information over a secure line, request
cheque books and stop payment, and even transfer funds between ICICI
Bank accounts. Citibank has been offering net banking to customers.

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Products like credit cards, debit cards, flexi deposits, ATM cards, personal
loans including consumer loans, housing loans and vehicle loans have been
introducing by a number of banks.

Corporate are also deriving profits from the increased variety of products and
competition among the banks. Certificates of deposit, Commercial papers,
Non –convertible Debentures (NCDs) that can be traded in the secondary
market are gaining popularity. With the introduction of Rupee floating rates for
deposit as well as advances, products like interest rate swaps and forward
rate agreements for foreign exchange are offered by almost every authorized
dealer bank in the market. This list of services is still growing.

At last to conclude that in the near future, India will be forced to apply the
norms of developed countries to the Banking Industry. Consequently, many
Indian banks will show very poor return ratio and dozens of banks will go
bankrupt. Thus, it becomes imperative that the Banking Industry should
streamline itself and become more compatible with global norms in the fields
of operation and services.

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2.2 NATIONAL LEVEL SCENARIO OF BANKING INDUSTRY

India’s Rs 77 trillion (US$ 1.25 trillion) –banking industry is the backbone to

the economy. The sector emerged strong from global financial turmoil and
proved its mettle when the developed economies were shaking.

Banking in India originated in the last decades of the 18th century. The oldest
bank in existence in India is the state bank of India, a government owned
bank that traces its Origen back to June 1806 and that is the largest
commercial bank in the country. Central banking is the responsibility of the
reserve bank of India, which in 1935 formally took over this responsibility from
the term imperial bank of India, relegating it to commercial banking function.
After Indians independence in 1947, the reserve bank was nationalized and
given broader power in 1969 the government nationalize the 14 largest
commercial Bank. The government nationalize the six next largest in 1980.

Currently Indian has 88 scheduled commercial bank (SCBs) -27 public sector
banks (that is with the government of India holding a 31 privet banks and 38
foreign banks. They have a combined network of over 5300 branches and
17000 ATM according to a report by ICRA limited a rating agency the public
sector bank hold over 75 percent of total assets of the banking industry with
the private and foreign banks holding 18.2% and 6.5% respectively. The
Indian banking can be broadly categorize in to nationalize, privet bank and
specialized banking institutions.

The reserve bank of India acts a centralized body monitoring any

discrepancies and shortcoming in the system. Since the nationalization of
banks in 1969, the public sector bank or the nationalize banks have acquired
a places of prominence and has since then have achieved tremendous
progress. The need to become highly customer focused the slow moving
public sector banks to adopt a fast track approach. Conservative banking
practice allowed India banks to be insulated partially from the Asian currency
crisis. Indian banks are now quoting all higher valuation when compared to
banks in other Asian counters that have major problem linked to huge
nonperforming assets and payment defaults. Co-operative bank are nimble

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footed in approach and armed with efficient branch networks focus primarily
on the high revenue niche retail segments.

The Indian has finally worked up to the competitive dynamics of the new
Indian market and is addressing the relevant issues to take on the multifarious
challenges of globalization. Bank that employee IT solution are perceived to
be futuristic and proactive players capable of meeting the multifarious
requirement of the largest customer’s base.

The banking in India is highly fragmented with 30 banking units controlling to

almost 50% of deposit and 60% of advance Indian nationalized banks
contentious to be the major lenders in the economy due to their sheet size
and penetrative networks which assures them high deposit mobilization. The
India banking can be broadly categorized in to nationalize banks privet banks
and specialized banking intuitions. The reserve bank of India acts as a
centralized body monitoring any discrepancies and short coming in the
system. It is the fore most monitoring body in the Indian financial sector.

The nationalized banks continue to dominate the Indian banking arena

industry estimates indicate that out of 274 commercial banks operating in
India, 233 banks are in the public sector and 51 are in the privet sector. The
privet sector banks grid also includes 24 foreign banks that have started their
operation here.

India’s banking sector is on a high –growth trajectory with around 3.5 ATMs
and less than seven bank branches per 100,000 people, according to a World
Bank report. The statistics are going to improve in near future as the
government aims to have maximum financial inclusion in the country.
Policymakers are making all the efforts to provide a facilitating policy
framework and infrastructure support to ensure meaningful financial inclusion.
Apart from that, financial institution are collaborating with other service
providers (in the fields of telecom, technology and consumer product
providers) to create an enabling environment.

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2.3 STATE LEVEL SCENARIO OF BANKING INDUSTRY
The Gujarat Urban Co – operative Banks Federation was established in
Ahmedabad on 5th March 1975 in accordance with the provisions of the
Gujarat Co-Operative Society Act, 1961. Gujarat Urban Co–operative
Banks Federation (GUCBF) is the apex body of 244 urban co-operative
banks in Gujarat.

The Gujarat Co-operative Banking Sector has been servicing the common
man since last 125 years much before the Gujarat Co-operative Societies
Act got enacted in 1908, 103 years back.

Gujarat Urban Co-operative Banks, big & small, have been playing an
instrumental role as financial power houses for the common man in each
stage of his life - education, career building as entrepreneurs, helping buy
the dream home, meeting personal needs through gold loans, setting up
industries through term loans, business expansion through working capital
limits & encouraging savings through term deposits.

All through these years and in the context of the recent global meltdown
that shook the Western & European world the Co-operative Banking
Sector has stood the test of time. It continues to demonstrate that it is a
sustainable & viable model offering affordable finance for not only
economic but socio economic upliftment of the common man.

Historically Co-operative Banks were started by ordinary people with

miniscule capital. To date these banks represent the common man. These
people have a feeling of ownership & pride in their association. Over time
these banks have become financially strong & the assets generated by
these banks also belong to the common people who are their members:

The Federation is currently working on three major areas

1. Technology up gradation to help even the tiniest bank acquire

capabilities to offer world class banking.

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 2. Consolidate the co-operative brand ―Proudly Co-operative‖ to
provide banks & other Co-operative Organizations with a
uniform identity.

3. Carry out research for the sector to develop a road map for 2020
in its endeavor to constantly prepare banks to meet future
challenges.
The declaration of 2012 as the International Year of Co-operatives by
UNO has given us a unique opportunity to go to the public to highlight
success stories, various socio-economic business models & initiatives
that the Federation & its member banks have taken.

The Federation has decided to celebrate this year through various

initiatives for financial inclusion & inclusive growth. The details of such
initiatives & projects with emphasis on youth & women are highlighted
separately under the title IYC initiatives.

The Federation is committed to serve the common man guided by Co-

operative Principles, Values & Regulation. The Federation continues to
be absolutely confident that the Urban Co-operative Sector of the State
is fully geared to raise to the expectations of the common man and
handhold each such individual to a safe, secure & prosperous future.

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2.4 PESTEL OF BANKING INDUSTRY

 Political Factor

 Focus on regulation of government:

The Indian banking industry is mostly dependent on the

monetary policy decided by the RBI. Indian banking sector is least
affected as compared to other developed countries. Stricter
regulations with respect to capital and liquidity directly affect business
of banks and securitization act has given more power to banking
sector against defaulting borrowers.

 Budget and budget measure:

Increase Farm Credit. Subvention of 1% to be paid as incentive

to farmers. Sometimes government gives Debt Waiver for Farmers
Setting up of separate task force for those not covered under the debt
waiver scheme.

 Economic Factor

 Monetary policy:

Every year RBI declares its 6 monthly policies and accordingly

the various measures and rates are implemented which has an impact
on the banking sector. The Economic measures affects the banking
sector to boost the economy by giving certain concessions or facilities.
If in the savings are encouraged, then more deposits will be attracted
towards the banks and in turn they can lend more money to the
agricultural sector and industrial sector, therefore, booming the
economy.

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  GDP:
Indian economy has registered robust growth in past years and
Banking sector is directly related to the growth of the economy.G01 is
trying to push the economy by framing favorable FDI policies , NRI
Investment plans which directly affect the GDP. These plans directly
affect banking industry as money comes through banks and bank
earns interest on that.

 Interest Rate:

RBI controls interest rates, which RBI monitors regularly.

Recently RBI reduced bank rate to stimulate growth of banking
industry Inflation Rate.

 Inflation Rate:

India is facing huge troubles due to inflation as it is 10% now. To

curb the inflation and slowdown of economy RBI has taken various
steps like lowering interest rates to increase the demand in banking
sector.
 Savings And Investments:

Gross domestic saving is 28% of total income in India. Latest

step taken by RBI to deregulate savings rates is a step to increase
Bank savings.

 Socio Cultural Factor

 Change in life style:

Life style of India is changing rapidly. They are demanding high

class products. They have become more advanced. People needs
and wants are increasing day by day. And this has this has opened

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 opportunities for banking sector to tap this change. This has made
things available easily to everyone.

 Population:
Increase in population is one of the important factors, which
affect the private sector banks. Banks would open their branches after
looking into the population demographics of the area. Newer branches
are coming to serve the increasing population. This incentive to banks
comes on the back of the continuing need to open more branches in
these States in order to ensure more uniform spatial distribution.

 Literacy Rate:

Literacy rate in India is very low compared to developed

countries. Literate people hesitate to transact with banks. So, this
impacts negatively on banks. But there is positive side of this as well
i.e. illiterate people trust more on banks to deposit their money; they
do not have market information. Opportunities in stocks or mutual
funds.

 Technological Factor

 ATM:

The latest developments in terms of technology in computer and

telecommunication have encouraged the bankers to change the
concept of branch banking to anywhere banking. The use of ATM and
Internet banking has allowed 'anytime, anywhere banking' facilities.

 Automatic Voice Recorder:

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 Automatic voice recorders now answer simple queries, currency
accounting machines makes the job easier and self-service counters
are now encouraged.

 IT Services and mobile Banking:

Today banks are also using SMS and Internet as major tool of
promotions and giving great utility to its customers. For example SMS
functions through simple text messages sent from your mobile.
Technology advancement has changed the face of traditional banking
systems. Technology advancement has offer 24X7 banking even
giving faster and secured service.

 Environmental Factor

 Growth of economy:

Indian economy has registered a high growth for last three years
and is expected to maintain robust growth rate as compare to other
developed and developing countries. Banking Industry is directly
related to the growth of the economy. The growth rate of different
industries were: Agriculture:18.5 Industry :26.3% Services: 55.2%.
This increases the avenues of investment by the industrial sector. This
would further increase the borrowings by the industry's leading to the
banking Industry. In regards with the service sector, as the income of
the people will increase, lending and savings will increase leading to
increased business for the banks.

 Increases the avenues of investment:

It is great news that today the service sector is contributing more

than half of the Indian GDP. This increases the avenues of investment
by the industrial sector .This would further increase the borrowings by
the industry’s leading to the banking Industry.
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  Income of people increases:

In regards with the service sector, as the income of the people will
increase, lending and savings will increase leading to increased
business for the banks.

 Legal Factor:

 Banking Regulation Act:

The Banking Regulation Act also provided that no new bank or

branch of an existing bank could be opened without a license from the
RBI, and no two banks could have common directors.

 Intervention by RBI:

The Reserve Bank of India (RBI) will intervene to smooth sharp

movements in the rupee and prevent a downward spiral in its value,
but will balance this with the need to retain reserves in the event of
prolonged turbulence.

2.5 CURRENT TRENDS IN BANKING INDUSTRY

There has been considerable innovation and diversification in the business of

major commercial banks. Some of them have engaged in the areas of
consumer credit, credit cards, merchant banking, leasing, mutual funds etc. A
few banks have already set up subsidiaries for merchant banking, leasing and
mutual funds and many more are in the process of doing so. Some banks
have commenced factoring business.

1. Electronic Payment Services — E Cheques

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Now -a -days we hear about e -governance, e-mail, e -commerce, e -tail etc.
In the same manner, a new technology is being developed in US for
introduction of e -cheque, which will eventually replace the conventional paper
cheque. India, as harbinger to the introduction of e -cheque. The Negotiable
Instruments Act has already been amended to include: Truncated cheque and
E -cheque instruments.

2. Real Time Gross Settlement (RTGS)

Real Time Gross Settlement system, introduced in India since

March 2004, is a system through which electronics instructions can be given
by banks to transfer funds from their account to the account of another bank.
The RTGS system is maintained and operated by the RBI and provides a
means of efficient and faster funds transfer among banks facilitating their
financial operations. Funds transfer between banks takes place on a 'Real
Time' basis. Therefore, money can reach the beneficiary instantaneously and
the beneficiary's bank has the responsibility to credit the beneficiary's account
within two hours.

3. Electronic Funds Transfer (EFT)

Electronic Funds Transfer (EFT) is a system whereby

anyone who wants to make payment to another person/company etc. can
approach his bank and make cash payment or give instructions/authorization
to transfer funds directly from his own account to the bank account of the
receiver/beneficiary. Complete details such as the receiver's name, bank
account number, account type (savings or current account), bank name, city,
branch name etc. should be furnished to the bank at the time of requesting for
such transfers so that the amount reaches the beneficiaries' account correctly
and faster. RBI is the service provider of EFT.

4. Electronic Clearing Service (ECS)

Electronic Clearing Service is a retail payment system that

can be used to make bulk payments/receipts of a similar nature especially
where each individual payment is of a repetitive nature and of relatively
smaller amount. This facility is meant for companies and government

18
departments to make/receive large volumes of payments rather than for funds
transfers by individuals.

5. Automatic Teller Machine (ATM)

Automatic Teller Machine is the most popular devise in

India, which enables the customers to withdraw their money 24 hours a day 7
days a week. It is a devise that allows customer who has an ATM card to
perform routine banking transactions without interacting with a human teller.
In addition to cash withdrawal, ATMs can be used for payment of utility bills,
funds transfer between accounts, deposit of cheques and cash into accounts,
balance enquiry etc.

6. Point of Sale Terminal

Point of Sale Terminal is a computer terminal that is linked

online to the computerized customer information files in a bank and
magnetically encoded plastic transaction card that identifies the customer to
the computer. During a transaction, the customer's account is debited and the
retailer's account is credited by the computer for the amount of purchase.

7. Tele Banking

Tele Banking facilitates the customer to do entire non -

cash related banking on telephone. Under this devise Automatic Voice
Recorder is used for simpler queries and transactions. For complicated
queries and transactions, manned phone terminals are used.

8. Electronic Data Interchange (EDI)

Electronic Data Interchange is the electronic exchange of

business documents like purchase order, invoices, shipping notices, receiving
advices etc. in a standard, computer processed, universally accepted format
between trading partners. EDI can also be used to transmit financial
information and payments in electronic form.

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2.6 MAJOR PLAYERS IN BANKING INDUSTRY

Public sector:

 State Bank Of India

 Punjab National Bank
 Bank of Baroda
 Union Bank
 Central Bank Of India
 Dena Bank

Private sector:

 Axis Bank
 HDFC Bank
 ICICI Bank
 Kotak Mahindra Bank
 Dhanlaxmi Bank Ltd.
 Yes Bank Ltd.
 The Standard charter bank.
Co-operative sector:
Scheduled Urban co-operative bank

 Ahmedabad mercantile co-operative bank

 Kalupur commercial co-operative bank
 The Surat peoples co-operative bank ltd.
 RajotNagrikSahakari bank ltd.
 Mehasana urban co-operative bank ltd.
State co-operative bank:

 Jammu and Kashmir co-operative bank ltd.

 Andhra Pradesh state co-operative bank ltd.
 Gujarat state co-operative bank ltd.
 Delhi state co-operative bank ltd.
 Bihar state co-operative bank ltd.
 Adinath Co-operative Bank Ltd.
 AkhandAanand Co-operative Bank Ltd.
 Kosamba Mer. Co-operative Bank Ltd.
 MandviNagrikSahakari Bank Ltd.

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2.7 MAJOR OFFERINGS IN BANKING INDUSTRY

Co-operative banks are small-sized units organized in the co-operative

sector which operate both in urban and non-urban centers. These banks
are traditionally centered on communities, localities and work place groups
and they essentially lend to small borrowers and businesses.

This bank provide most services such as savings and current accounts,
safe deposit lockers, loan or mortgages to private and business
customers. For middle class users, for whom a bank is where they can
save their money, facilities like Internet banking or phone banking is very
important.

This bank offering internet banking to their customers so that customers

can easily access their account from internet banking.

Bank also offers mobile application to their customers so that any

customer can easily access their account with the using of mobile phone.

They are providing agriculture loans as well as non-agriculture loans to the

individuals and societies.

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