INTRODUCTION TO INDIAN BANKING

India cannot have a healthy economy without a sound and effective banking
system. The banking system should be hassle free and able to meet the new
challenges posed by technology and other factors, both internal and external.
Indian economic environment is witnessing path breaking reform measures. The
financial sector, of which the banking industry is the largest player, has also been
undergoing a metamorphic change. Today the banking industry is stronger and
capable of withstanding the pressures of competition. While internationally
accepted prudential norms have been adopted, with higher disclosures and
transparency, Indian banking industry is gradually moving towards adopting the
best practices in accounting, corporate governance and risk management. Interest
rates have been deregulated, while the rigor of directed lending is being
progressively reduced.
The history of Indian banking can be divided into three main phases.
Phase I (1786- 1969) - Initial phase of banking in India when many small banks
were set up
Phase II (1969- 1991) - Nationalization, regularization and growth
Phase III (1991 onwards) - Liberalization and its aftermath
With the reforms in Phase III the Indian banking sector, as it stands today, is
mature in supply, product range and reach, with banks having clean, strong and
transparent balance sheets. The major growth drivers are increase in retail credit
demand, proliferation of ATMs and debit-cards, decreasing NPAs due to
Securitization, improved macroeconomic conditions, diversification, interest rate
spreads, and regulatory and policy changes (e.g. amendments to the Banking
Regulation Act).

Today, we are having a fairly well developed banking system with different classes
of banks public sector banks, foreign banks, private sector banks both old and
new generation, regional rural banks and co-operative banks with the Reserve
Bank of India as the fountain Head of the system. In the banking field, there has
been an unprecedented growth and diversification of banking industry has been so
stupendous that it has no parallel in the annals of banking anywhere in the world.
During the last 41 years since 1969, tremendous changes have taken place in the
banking industry. The banks have shed their traditional functions and have been
innovating, improving and coming out with new types of the services to cater to
the emerging needs of their customers. Massive branch expansion in the rural and
underdeveloped areas, mobilization of savings and diversification of credit
facilities to the either to neglected areas like small scale industrial sector,
agricultural and other preferred areas like export sector etc. have resulted in the
widening and deepening of the financial infrastructure and transferred the
fundamental character of class banking into mass banking.
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. Certain trends like growing competition,
product innovation and branding, focus on strengthening risk management
systems, emphasis on technology have emerged in the recent past.

SERVICE QUALITY
The SERVQUAL service quality model was developed by a group of American
authors, 'Parsu' Parasuraman, Valarie Zeithaml and Len Berry, in 1988. It
highlights the main components of high quality service. The SERVQUAL authors
originally identified ten elements of service quality, but in later work, these were
collapsed into five factors - reliability, assurance, tangibles, empathy and
responsiveness - that create the acronym RATER.
Businesses using SERVQUAL to measure and manage service quality deploy a
questionnaire that measures both the customer expectations of service quality in
terms of these five dimensions, and their perceptions of the service they receive.
Service quality is a comparison of expectations with performance. When customer
expectations are greater than their perceptions of received delivery, service quality
is deemed low.
A business with high service quality will meet customer needs whilst remaining
economically competitive. Improved service quality may increase economic
competitiveness. This aim may be achieved by understanding and improving
operational

processes;

identifying

problems

quickly

and

systematically;

establishing valid and reliable service performance measures and measuring

customer satisfaction and other performance outcomes. In additional to being a
measurement model, SERVQUAL is also a management model. The SERVQUAL
authors identified five Gaps that may cause customers to experience poor service
quality.

SERVICE GAPS:
Customers compare the service they experience with what they expect and
when it does not match the expectation a gap arises.

1) Customer Gap:
The customer gap is the difference between customer expectations and
perceptions. This gap arises when the management does not correctly
perceive what the customers want. Customer expectations are standards or
reference points that customers bring into the service experience, whereas
customer perceptions are subjective assessment of actual service
experiences. Closing the gap between what customers expect and what they

perceive is critical to delivering quality service; it forms the basis for the
gaps model.
2) Providers gap:
To close all the important gap, the gaps model suggests the 4 other gaps
i.e. the provider gaps which occurs within the organization providing the
service and include the following gaps:
Provider GAP 1:Listening gap:
The listening gap is the difference between customer expectations of
services and company understanding of those expectations. The primary
reason that many firms do not meet customers expectation is that the firms
lack an accurate understanding of exactly what those expectations are.
Provider GAP 2:Service Design & Standards Gap
In this gap the difference between company understanding of customer
expectations and the development of customer-driven service designs and
standards. Customer driven standards are different from the conventional
performance standards that companies establish for service in that they
based on pivotal customer requirements that are visible to and measured by
customers.
Provider GAP 3:Service Performance gap:
The service performance gap is the discrepancy between the development of
customer- driven service standards and actual service performance by
company employees. Even when guidelines exist for performing service
well and treating customers correctly, high-quality service performance is
not a certainty.

 Provider GAP 4:Communication Gap:

It is the difference between service delivery and the service providers
external communication. Promises made by a service company through its
media advertising, sales force and communication may raise customer
expectations, the standards against which customers assess service quality.
DETERMINANTS OF SERVICE QUALITY:
Below are the five principles that a customer service needs to rely on to succeed.
1) Tangibles: The physical asset an agency utilizes positions the agency against
their competitors. I often tell the people Im training that the reports we hand
customers are one of the most important elements of our job. The reports we
create are the only thing the customer can hold on to and review at the end of the
day. These reports must look professional, be 100% accurate, and include metrics
relevant to the customers business. A lawn care business depends on the visual
impression that well cared for equipment and uniforms can make to their
customers. Accountant, lawyers, & financial planners depend on their appearance
to convey professionalism and trustworthiness to clients.
2) Reliability: A customer service business is only as good as the quality of service
they provide. When I use the term reliability, I am referring to performance.
Reliability is more than good performance because rarely is performance always
good. Reliability is a plan to deliver good performance and a commitment to
implement a performance plan.
3) Responsiveness: A client does not like to be left wondering when the service
company will return their call, answer their email, or show up to fix a problem. A

good customer service company makes responsiveness a top priority and sets
measurable goals pertaining to customer responsiveness. Examples: how long it
will take to respond to emails and calls and how long it will take to solve a
customers problem.
4) Assurance: The amount of confidence a customer service company installs in
the client. The customer service company must work to make the client trust them.
This principle involves every touch point within an organization. From the people
that answer the phone to the people that interact with the customer every day,
assurance must be a priority. If the client does not trust your organization to work
in their best interests, they will not be a client for long.
5) Empathy: Customer service companies must work to understand their clients
business and the goals of their contact. If a customer service company takes time
to know a clients business, they can grow as clients business grows and respond to
problems in an appropriate manner. If the customer service company can sense
when a client is frustrated and can respond appropriately, it is easy for a company
to keep clients.

SERVICES IN BANKING INDUSTRY:

The ongoing process of economic reforms has completely changed the operational
environment for the whole banking industry in the country.
Indian banking is at cross roads today. With the deregulation and liberalization
process in full swing, the consequent policy changes introduced in the Indian
financial system in general and banking in particular are effecting unprecedented
changes in its functioning. With the emerging changes did spring up new
challenges of commercial viability, cost effectiveness, effective marketing strategy,
etc. Market oriented policies also gave birth to new players like foreign and private
sector banks and subsidiaries offering varied high tech and cost effective Service.
There was an absolute shift from sellers into buyers market, establishing the
consumer as the key factor in the market. The dictum as the bank exists because
of its customers, has become more pronounced and relevant in the present
context. Thus, marketing constitutes the key strategy for banks to retain good
customers and also anticipate their future demands.
The Foreign Sector Banks and Private Sector Banks have already incorporated the
concept of Service Marketing in their working. Thanks to competition from these
banks, Public Sector Banks have also started to effect some visible changes in their
day to day working. The concept of service marketing includes new products,
placement, price and promotion in their business development plan; they have
taken a 360 Degree turn. Public Sector Banks are sharpening their products and
services while reasserting their strengths to cater to younger, savvier customers.
From swank waiting rooms to glitzy lobbies and better service, theyre pulling out
all stops to attract customers.

IMPORTANCE OF SERVICE QUALITY IN BANKING INDUSTRY

Increased competition, highly educated consumers, and increase in standard of
living are forcing many businesses to review their customer service strategy. Many
business firms are channeling more efforts to retain existing customers rather than
to acquire new ones since the cost of acquiring new customer is greater than cost of
retaining existing customers.
There is enough evidence that demonstrates the strategic benefits of quality in
contributing to market share and return on investment. Maximizing customer
satisfaction through quality customer service has been described as the ultimate
weapon by Davidow and Vital (1989). According to them, in all industries, when
competitors are roughly matched, those who stress on customers service will win.
In view of the above mentioned facts, an analysis of service quality perceptions
from customers point of view may be sound and interesting at this juncture. Such
an analysis will provide banks, a quantitative estimate of their services being
perceived with intricate details such as whether banks are meeting the expectations
of the customers or not.

MEASURING SERVICE QUALITY IN BANKING SECTOR

Customer is vital for the development of trade, industry and service sector
particularly in financial services. Therefore, the significance of customer service in
the banking sector came to force to compete in a market driven environment.
Measuring service quality in the service sector particularly in the banking sector is
more difficult than measuring the quality of manufactured goods. The service
sector as a whole is very heterogeneous and what is heterogeneous may hold true
for one service and may not hold for another Service sector.
Each bank is having a variety of services. Due to this differentiation, services in
this industry could not be standardized, moreover these services are intangible in
nature which could not be compared or seen.
The concept of customer satisfaction and service quality is interrelated with each
other. Moreover satisfaction of customer depends upon service quality and service
quality is increasingly offered as a strategy by marketers to position themselves
more effectively in the market place. Due to the advent of e-banking, quality of
service has been improved a lot as compared to traditional banking services.
Internet banking, Mobile banking, automated teller machine, electronic fund
transfer has totally changed the way of providing services by the banks.

GAP MODEL AUDIT:

HISTORY OF KARNATAKA BANK

Karnataka Bank was incorporated on 18 February 1924, & commenced business
on 23 May 1924. Its founders established it at Mangalore, a coastal town in the
Dakshina Kannada district of Madras Presidency. Among the founders, who
created the bank to serve the South Kanara region, was B. R. Vysaray Achar
Another important personality associated with the bank was K. S. N. Adiga, who
served as Chairman from 1958 to 1979.
In the 1960s Karnataka Bank acquired three smaller banks. In 1960 Karnataka
Bank acquired the Sringeri Sharada Bank, which was established in 1942 and
which had four branches when Karnataka acquired it. Four years later, Karnataka
Bank took over the assets and liabilities of the Chitradurga Bank (also known as
Chitladurg Bank), which was established in 1868 in Mysore State and was the
oldest bank in Mysore. Lastly, in 1966 Karnataka Bank took over the assets and
liabilities of the Bank of Karnataka, in Hubli. Bank of Karnataka had been
established in 1946 and had opened one branch in Belgaum in 1947. At the time of
this acquisition, Bank of Karnataka had 13 branches.
In 2000, Karnataka Bank signed a memorandum of understanding with Infosys
Technologies to develop a core-banking solution called FINACLE. Over 221
branches were networked up to March 31, 2004. The main motto of this program is
"Anytime/Anywhere banking". In 2002, the bank concluded a pact with
Corporation Bank for sharing its ATMs. A year later, the bank introduced the

Moneyplant card that allows customers to withdraw money from any of their
Karnataka bank accounts.

In September 2003, the bank shifted its head office from Kodialbail to Kankanady.
The total business turnover of the Bank was

68928.32 crore as on 31st March

2014, an increase of 12.51% over the preceding year. The total assets of the Bank
increased from

41526.38 crore to

47028.80 crore recording a growth of

13.25% for the year 2013-14. Karnataka Bank has been striving to keep pace with
advances in banking technology by adopting core banking and Internet banking,
and establishing its "MoneyPlant" automated teller machine system.
The bank has the Best Bank Award for "Managing IT Risk" under small bank
category for the year 2010-11, instituted by Institute for Development and
Research in Banking Technology (IDRBT). Shri Anand Sinha, deputy governor,
Reserve Bank of India and chairman, IDRBT presented the award to Shri P.
Jayarama Bhat, managing director at a function held in Hyderabad on 4 August
2011 in the presence of Shri B. Sambamurthy, director, IDRBT.
In August 2008, Karnataka Bank received the Sun and NDTV Green IT Award.
Sun Microsystems and NDTV gave the award to in recognition of the bank's
"green policies" and use of earth-friendly technology such as solar power
With over 88 years experience at the forefront of providing professional banking
services and quality customer service, we now have a national presence with a
network of 642 branches spread across 20 states and 2 union Territories. Managed

by a dedicated & professional management team, we have over 6084 employees,

105099 shareholders and over 6.7 million customers.
Today, we have emerged as a leading Financial Service Institution in India

PERSONAL BANKING
We at Karnataka Bank offer a total value package, a one-stop shop for all youre
banking needs. We thoroughly research these needs and create the right solution at
the right time, with speed and efficiency, for your maximum benefit.
We are committed to providing you with customized services designed to suit your
individual requirement whether it be high earning deposits, easy and convenient
loans, life insurance, utility bill payments or enabling you to keep track of your
finances, thereby saving your time.
We have worked with one focus - YOU. We are relentless in finding ways to make
your hard earned money work harder.
BUSINESS BANKING
Continuous improvement is the only business strategy that can provide you with a
clear competitive edge and keep you ahead of the fierce competition.
We understand the dynamics of competition in today's fast changing world. We
understand the growth need of every business irrespective of the size. We offer a
variety of carefully drafted tailor made Banking products to help your business get
that edge in this competitive environment.
We provide Working Capital Finance , Term Loans and Infrastructure Finance to

help your Business grow. With providing these type of finances to start an industry,
to financing your working capital, we have Business Finance Products both fund
based and non-fund based suited to all sectors of Industry.

INTERNET BANKING:
Our internet banking facility money click lets you to manage your finances in the
comfort of your home or your office as per your convenience. Money click is a
self-service channel, which are available 24 hours & 365 days a year in an
absolutely simple, friendly but secured environment. To enhance the security under
Internet banking two factor authentications is activated with SMS/Email OTP (One
time password), cooling period of 24 hours is introduced for addition of
beneficiary

COMPANY PROFILE

Type
Traded as
Industry
Founded
Headquarters
Key people
Products
Revenue
Total Assets
Employees
Website

Public
BSE:532652
NSE:KTKBANK
Banking, Financial services
1924
Mangalore, Karnataka, India
P Jayarama Bhat (MD)
Retail Banking, Corporate

Banking,

Finance, Insurance & Mortgage loans

Rs. 68928.32 crores (March 2014)
Rs. 47028.80 crores (May 2014)
6000+
KARNATAKAbank.com

PRODUCTS & SERVICES

Money click
KBL Mobile
Money Transfer
Online shopping
Online Trading

MoneyPlant ATM
Cards
Personal Banking
Multi Branch Banking
Deposit Products
Loans
Insurance Services
Demat Services
Mutual Fund
NRI Services
Forex Services

NEED OF THE STUDY

Customer is vital for the development of trade, industry and service sector
particularly in financial services. Therefore, the significance of customer service in
the banking sector came to force to compete in a market driven environment.
Opening core systems to useful customer services.
Changing the product sales culture to a customer service culture.
The inability to experiment and let customers drive adoption.
The dictum as the bank exists because of its customers, has become more
pronounced and relevant in the present context. Thus, marketing constitutes the
key strategy for banks to retain good customers and also anticipate their future
demands. Increased competition, highly educated consumers, and increase in
standard of living are forcing many businesses to review their customer service
strategy.
Many business firms are channeling more efforts to retain existing customers
rather than to acquire new ones since the cost of acquiring new customer is greater
than cost of retaining existing customers. When competitors are roughly matched,
those who stress on customers service will win. In view of the above mentioned
facts, an analysis of service quality perceptions from customers point of view may
be sound and interesting at this juncture. Therefore it is very important to
understand the end users perceptions and expectation.

OBJECTIVES OF STUDY

 To understand the customer & service provider gaps.

To understand the service provider strategies to overcome the above gap.
To understand the customer expectation & perceptions of service.
To know the firms performance in meeting its customers expectations.

RESEARCH METHODOLOGY
The study relies on both primary as well as secondary data.

SERVQUAL Model for Gap Analysis: The test instrument called SERVQUAL
was used to measure the service quality. The first part of the questionnaire asks
customers to indicate the level of service they would expect and second part of
asks customers to evaluate the service performance. Gap analysis involves
calculating service quality that involves subtracting a customers perceived level of
service received from what was expected.
Primary Data: Primary data was collected by conducting the survey using
structured questionnaire of service quality model with personal interview. The
questions prepared were mainly based on the dimensions of service quality, where
in each question were given 7 point ratings scale and the customers had to tick any
one rating based on their expectations and perceptions for the services provided by
the organization.
Secondary data: The source of the secondary data is drawn from Karnataka Bank
publications and the sites of the banks to which respondents are customers. Various
journal articles have been referenced for understanding the background of the
study.
Sample size:

The sampling method used is proportionate stratified Random

Sampling. The total numbers of customers were randomly selected for survey was
100.The 100 customers were selected from Dharwad residents and bank customers
of Karnataka Bank.

Data Analysis: The data is analyzed by finding the mean scores of the various
Servqual dimensions both for expectations and perceptions. Such mean scores are
compared with each other to find the gaps between expectations and perceptions.

The service quality gaps of customers of various types of banks across cities are
compared. Further these gaps are cross tabulated with the profile of consumers.
Limitations of the Study:
The study is limited to the study of expectations and perceptions of customers
having an account in Karnataka Bank. The perceptions and expectations of
customers are limited to the time period of the study. The study is limited only to
Dharwad city branches of Karnataka Bank.

CONCLUSIONS

This research will let us know the gaps that exist between the customer and the
provider and what are the possible solutions to overcome those gaps with respect to
Karnataka Bank. From this survey we will be comparing the findings of service
quality rating with customers profile. And also the customer perception with
respect to various dimensions likes empathy, reliability, responsiveness, assurance,
tangibles. And also we will find the bankers perception on service quality with
respect to Karnataka Bank. It gives good knowledge and experience to us.

REFERENCES:
INTERNET

http://en.wikipedia.org/wiki/Karnataka_Bank
http://info.shine.com/company/karnataka-bank-ltd/1694.html
http://www.iibf.org.in/documents/reseach-report/Report-26.pdf
http://www.ukessays.com/essays/commerce/an-analysis-of-karnataka-

bank-limited-commerce-essay.php
https://www.boundless.com/marketing/textbooks/boundless-marketingtextbook/services-marketing-6/service-quality-51/the-gap-model-2544140/
https://www.scribd.com/doc/19639288/Marketing-of-Banking-Services-1
http://gradestack.com/IBPS-Bank-PO-Clerk-by-Bank-Power/Commercial

Banks/14333-2890-593-study-wtw
http://en.wikipedia.org/wiki/Service_quality
http://www.jon-pape.com/5-determinants-of-quality-service
https://www.brainmates.com.au/brainrants/the-customer-service-gap-model
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2055075
https://www.google.co.in/search?
client=opera&q=Service+Gap+Analysis+of+Public+Transport+Servics+

+A+Case+Stdy+of+NWKRTC&sourceid=opera&ie=UTF-8&oe=UTF-8
http://www.theglobaljournals.com/ijar/articles.php?
val=NjUw&b1=125&k=32

BOOKS:
Services marketing by Valaries A Zeithmal, Mary Jo Bitner, Dwayne D.
Gremler & Ajay Pandit
Sixth Edition
(Part 1 Chapter 2- Conceptual Framework of the Book: The Gaps Model of
service Quality)