Service Quality and Customer Satisfaction at Siddhartha Bank Kakarvitta
A Dissertation submitted to the Office of the Dean, Faculty of Management in partial fulfillment of the
requirements for the Master’s Degree
By
Chandramani Dahal
Roll No: 8075/18
Registration No:7-0002-0039-2013
Campus: Mechi Multiple Campus
Chapter I
Introduction
1.1 Background of the study
In business Customers are god. For any business to be success customer’s satisfaction is the
most. In today’s competitive worlds satisfying customer has been one of an important Banking
strategy. So as to satisfy its customers there is a need to identify quality dimensions and
improve service quality for banks management. In Today’s world banking industry has been
highly competitive, with banks not only competing among each other; but also with non-banks
and other financial institutions. Almost all of the bank product developments can be duplicated
easily and as banks provide almost similar services, it can only distinguish itself on the basis of
price and quality. Hence, customer satisfaction is an effective tool that each bank should use to
gain a higher level advantage and survive in today’s ever-increasing banking cut-throat
competitive environment.
In today's competitive business world, so as to become number one bank by maximizing
deposits and gaining trust of customers, the commercial banks are competing with each others
in Nepal. So, for this situation the customer satisfaction, loyalty and retention become the
major issues. The major center to attract the customers in today’s scenario is high interest rates
and the other is fast/prompt including quality services. Those bank that is able to provide high
quality prompt services are able to retain the existing customers and also able to pull the new
customers to their branch and offices. That is why; banks frequently launch new schemes and
provide different quality services and facilities which will be helpful in retaining and attracting
the customers with different ideas, opinion, objectives and businesses. Hence, as a means for
customer satisfaction, this study explores service quality.
For the achievement of customer satisfaction and competitive advantage service quality has
been the most ever important thing. Service quality has been coupled with the increasing
complexities of the need and expectation of customers, to explore the relationship between
service quality and customer satisfaction it had been imperative. So, on the basis of service
provided by the commercial banks in Nepal, to examine the level of customer satisfaction is the
major objective of this study. The specific objectives are: to analyze the problems solved by the
banks which are rose by the customers; to analyze the promises and services made by the
banks is fulfilled and to identify how often the banks inform about their various products and
services in Nepal. The service quality provided by the selected commercial banks is determined
by customer satisfaction, shows this study.
1.2 Problem Statement
To examine the impact of service quality as an independent variable on dependent
variable i.e. customer satisfaction a study is designed, keeping in view the importance of
customer satisfaction and service quality.
1.3 Objectives of the study
• To assess the dimension of service quality and understanding satisfaction level of
the customers.
• To investigate the relationship between service quality and customer satisfaction.
• To put forward some possible recommendations to improve customer satisfaction.
 To identify the impact of Human-Related service quality factors towards the
perceived customer satisfaction in commercial banking sector.
 To identify the impact of Non-Human Related service quality factors towards the
perceived customer satisfaction in commercial banking sector
 To evaluate the relationship between service quality and perceived customer
satisfaction.
 To propose recommendations to enhance perceived customer satisfaction in
banking industry.
1.4 Conceptual Framework
Service Quality
Human Related Factors
Assurance
Reliability
Perceived Customer Satisfaction
Responsiveness
Empathy
Non Human Related Factors
Tangibility


Reliability: delivering on promises; Reliability is defined because the pliability to perform
the promised service dependably and accurate. Reliability means the corporate delivers
on its promises about delivery, service provision, problem resolution, and pricing, within
the broadest sense. Customers want to undertake to businesses with companies that
keep their promises, particularly their promises about the service out come and core
service attributes.
Tangibles: representing the service physically; Tangibles are defined as the looks of
physical facilities, equipment, personnel and communication materials. Tangibles
provide physical representations or images if the service that customer, particular new
customers will use to gauge quality.

Responsiveness -being willing to help; Responsiveness is that the willingness to help
customers and provide prompt services. This dimension emphasizes attentiveness and
promptness in addressing customer requests, questions, complaints and problems,
responsiveness is communicated to customers by the length of it slow they have to
attend for assistance, answer to questions or attention to problems, responsiveness also
captures the notion of flexibility and talent to customize the service to customer needs.

Assurance- inspiring trust and confidence; An assurance is defined as the flexibility of
the firm and its employees to inspire trust and confidence using employees’ knowledge
and courtesy. This diminution is perhaps visiting be particularly important for services
that customers perceive as high risk or for services of which they feel uncertain about
their ability evaluate outcomes.

Empathy –treating customers as individuals; Empathy is defined because the caring
individualized attention that the firm provides its customers. The essence of empathy is
conveying, though personalized or customized service, customers are unique and
special which their needs are understood. Customers want to feel understood by and
important to firms that provide service to them. Personal at small service firms often
know customers by name and build relationships that reflect their personal knowledge
of customer requirements and preferences. When such a tiny low firm competes with
larger firms, the flexibleness to be empathic may give the little firm a transparent
advantage.
CUSTOMER SATISFACTION
Customer satisfaction is that the extent to which a product’s perceived performance
matches a buyer’s expectations Kotler (2006). It further argues customer satisfaction
depends on the product’s perceived performance relative to a buyer’s expectations. If
the product’s performance falls in need of expectations, the customer is dissatisfied. If
performance matches expectations, the customer is satisfied and if performance
exceeds expectations, the customer is extremely satisfied or delighted. (Kotler 2006) .
Oliver (1997) defines customer satisfaction because the customers’ evaluation of a
product in terms of whether that product has achieved their needs and expectations. If
it fails to undertake to to so, dissatisfaction would occur. Satisfaction commonly has
thresholds at a lower level (under fulfillment) and at an upper level (over-fulfillment). A
consumer’s satisfaction may drop if he “gets an excessive amount of of an honest
thing”. People focus upon the lower threshold and neglect the potential for an upper
threshold. Outcomes of satisfaction feelings may involve intent to repurchase, word-ofmouth and complaints.
1.5 Hypothesis (if any)
a. The greater the service quality of the bank, the higher will be the customer
satisfaction.
b. There are two variables involved; independent Variable is Service Quality and its
various constructs are Reliability, Assurance, Tangibles, Empathy, and
Responsiveness. The dependent variable is Customer Satisfaction.
1.6 Rationale of the study
The findings of the study are likely to help service provider (Siddhartha banks) to
spot service quality dimensions that the majority predict customer’s satisfaction, so
as to focus on them consistent with their degree of importance. Thus, the current study
helped bank managers to rise understand a way to hold loyal customers by satisfying their
overall needs with expectation that they'll advocate for the bank, and hold their trust upon
the bank which ends up good profit, and enhances reputation further.
The findings from this study are likely also to be used as references for further research
work by anyone who may well be inquisitive about this area of study. By leveling the
sensitivity of various attributes of service quality on the customer satisfaction, the study are
likely to contribute academically towards future research, providing strategies to be put in
situ so as to fulfill customers’ needs in terms of satisfaction.
The findings of this study are likely to help policy makers in several Banks including SBL its
self, government and general public. They’re likely to use it while reviewing and Drafting
policies that usually act as guidelines on the approach that they always bear in mind
to ensure customer satisfaction.
Finally the study is probably going to assist customers to specific their feelings and
perceived position on the way banks are delivering services, with expectation to receive
improved service quality. The consideration that banks will give to findings from this study is
taken by customers as a possible upgrading of perceived service.
Chapter II
Literature Review
2.1 Introduction
Literature review is an important chapter which provides background and validation
for study undertaken (Scott &Bruce, 1994). This chapter provides a review of
pertinent literature on customer perception on banking communication among "A"
grade banks in Nepal. Therefore, related and relevant reviews are made on the
literature about the topic. This chapter is divided into six different sub-headings.
First section deals with concept related to study where general conceptual
knowledge on the study is portrayed. Second section showcases theoretical review
where various theories related to the study formulated by various scholars are
presented. Third section is followed by conceptual review which shows various
conceptual models and application of theories linking to study on the basis of
articles developed by various researchers. Empirical review is made on fourth
section where studies related to our area of study are reviewed. Policy review was
conducted in the fifth section where we discussed about various acts, policies, rules,
procedures formulated by government in the area of related study which shows the
suitability and need for the present study
2.2 Theoretical Review: (theorizes supporting the topic)
After hunting the literature review, the impact of service quality on customer
satisfaction is identified by using different theories which describes the role and
importance of service quality that ends up in customer satisfaction which is that
the main objective of all the service firms now days. Also various authors described
that quality of service together with other factors positively affect the
amount customer satisfaction. Literature depicts that quality isn't the sole factor
that affects satisfaction; there are various other factor that affects the both
constructs. The theoretical review introduces and critically comments on definitions,
theories. It introduces and describes the theories that designate why the research
problem under study exists (H.M.G.Y.J.Hennayake, 2017). It helps us to work
out what theories and a thought exists in relevancy our field of study.
The relationship between service quality and customer satisfaction has received
considerable academic attention within the past few years. Kirti Dutta & Anil Dutta,
(2009) observed that Customer expectations are more than perceptions and this gap
varies across the banking sector with tangibility having the very best impact on
overall customer satisfaction. Dharmalingam, Ramesh & Kannan,(2011) stated that
everyone the service quality attributes are positively correlated with customer
satisfaction. Prof Gopalkrishnan, et al, (2011) determined that Service quality and
customer satisfaction had a right away positive effect on customer’s retention
intentions out of which customer satisfaction could be a stronger predictor for
retention. (Jackie&Tam, 2004) found that customer with higher perceptions of the
worth of the service ends up in turn with greater satisfaction. Montes, Mar
&Fernandez, (2003) found that customers’ perceptions, attitudes and intentions are
being full of employees’ experiences and attitudes who are the inner customers of
the organization. In line with the foresaid literature the subsequent conceptual
framework has been developed in association of the model developed by Ziethmal&
Bitner 2003.
To higher understand the consequences of quality on customer satisfaction, the
link between constructs is explained by using Oliver’s 1993, satisfaction and
repair quality model. Oliver’s model is further tested and modified by Spreng and
Mackoy 1996, it specifies the effect of desires, perceived performance and
expectations on overall service quality and satisfaction. Another model presented by
Mcdougall & Levesque 2000, was wont to explain the link between satisfaction and
quality. It specifies the effect of core and relational quality and perceived value on
customer satisfaction that ultimately effect switching and loyalty (repurchase)
intensions. By considering the models from the literature a model is developed to
elucidate the link between the both constructs.
After discussing the importance and factors affecting the relationships between
service quality and satisfaction, further it is explained that how organisations can
improve its quality standards to retain the customers.
The improvements are described at three levels. For these purpose different
theories of Leonard, Parasuraman & Zeithmal 1994; Pfeffer et al., 1995 and
Parasuraman et al., 1985 are used.
First, Leonard theory described step by step strategies to improve the service
standards in the organisation. However from Leonard et al research seven important
steps are discussed in this study.
Second, Pfeffer theory explained the importance of managing work force in the
organisation in order to perform services as expected by the customers. Pfeffer
theory explained thirteen practises out of which the seven important were chosen
to discuss in this study.
Third, the Gap theory as explained by Parasuraman et al.,1985 is considered as most
important in the service setting, was also covered in this study. Parasuraman et al.,
1985 explained the gaps by describing how these gaps can be reduced in the
organizations. These gaps are considered as main hurdles in delivering high
performance services.
2.3 Empirical review
Empirical review of literature includes observed data or collected data. It is the
review of previous studies that relate or argues with the study being conducted at
present time. It can further be said as systematic identification, location and analysis
of documents containing information related to a research problem under
investigation. This review encompasses research question, objectives,
methodologies and findings of the previous studies (Healy & Palepu, 2014).
Through empirical review researcher is trying to gain brief knowledge on the field as
empirical review deals with reviewing previous studies related to similar topic of
present study. It would ease and create convenience for researcher to move forward
in the research showing paths to explore further. It will also help to identify gaps of
previous study which can be fulfilled in the present study. Similarly, through
empirical review researcher can build certain picture of whole research and prepare
themselves accordingly.
Customer satisfaction is one in all the important aspects of this research. It refers to
serving people with their requirements and making them satisfy. It’s a person’s
feeling of delight of or disappointment resulting from comparing a product’s, perceived
performance in reference to his or her expectations. If the performance falls in need
of expectations, the customer is dissatisfied. If the performance matches the
expectations, the customer is satisfied. If the performance exceeds the expectations,
the customer highly satisfied or delighted (Kotler & Keller, 2012). So customer
satisfaction refers to the extent to which customers are proud of the products and
services provided by a business. Customer satisfaction level is measured using survey
techniques and questionnaire. Gaining high level of customer satisfaction is
incredibly important to a business because satisfied customer are possibly to be loyal
and to form repeated orders and to use a good range of services offered by a business.
Customer satisfaction has been gaining increasing attention from the researchers and
practitioners as a recognized field of scholarly study and may be a fundamental
tool employed by financial institutions for enhancing customer loyalty and ultimately
organizational performance and profitability (Faizan, et al., 2011). In businesses where
the underlying products became commodity- like, quality of service depends heavily
on the standard of its personnel. This is often well documented in an exceedingly study
Leeds (1992). He documented that approximately 40 percent of customers’ switched
banks thanks to what they considered to be poor service. Leeds further argued that just
about three-quarters of the banking customers mentioned teller courtesy as a chief
consideration in choosing a bank. The study also showed that increased use of service
quality and professional behaviors (such as formal greeting) improved customer
satisfaction and reduced customer attrition. Additionally, satisfied customers may probe
for other providers because they believe they're visiting receive better service
elsewhere. However, keeping customers is additionally obsessive about quite other
factors. These include a wider range of product choices, greater convenience, better
prices, and enhanced income (Storbacka, et al, 1994). Formell (1992) in his study of
Swedish consumers notes that although customer satisfaction and quality appear to be
important for all firms, satisfaction is more important for loyalty in industries like banks,
insurance, order and automobiles
In one research, Ioanna (2002) further proposed that product differentiation is
impossible during a competitive environment a bit like the industry. Banks everywhere
are delivering the identical products. For example, there's usually only minimal variation
in interest rates charged or the range of products available to customers. Bank prices
are fixed and driven by the value. Thus, banks management tends to differentiate their
firm from competitors through service quality. Service quality is a crucial element
impacting customers’ satisfaction level within the industry. In banking, quality is also a
multi-variable concept, which has differing kinds of convenience, reliability, services
portfolio, and critically, the staff delivering the service.
Service Quality
Service quality is additionally an important aspect to the present research. The
attainment of quality in product and services has become an important concern of the
1980s. While quality in tangible goods has been described and measured by marketers,
quality in services is basically undefined and not being researched. Parasuraman,
Zeithaml and Berry (1988) try and rectify this instance by investigating the quality in
numerous service businesses and by developing a model of service. Service quality has
been described as a range of attitude that results from the comparison of expectation
with performance (Cronin & Taylor, 1992: Parasuraman et al., 1985). Gronroos (1982)
argued that customers, while evaluating the quality of a service, compare the service
they expect with perceptions of the services they really receive it has been argued
that the quality of services isn't a one-dimensional that relate to both core and
augmented service offerings (Bitran & Lojo, 1993; Gronroos,1984;Lewis 1993). Customer
satisfaction can thus be based not only on the judgment of the customer towards
reliability of the delivered service but also on customer’s experiences with the service
delivery process. It’s generally accepted that customer satisfaction often depends on the
quality of product or service offering (Anderson & Sullivan, 1993;Levesque & McDougall,
1996). For this reason, research on customer satisfaction is typically closely associated
with the measurement of quality. Thus, both service quality and customer satisfaction
share an thorough relationship.
Chapter III
Research Methodology
3.1 Research Design
In this study, descriptive research design is going to be used. This study is going to be mainly
supported primary data. Primary sources of information are going to be collected through
comprehensive interview with employees of various departments with the assistance of
structured and unstructured questionnaire. So on accommodate level of customer satisfaction
within the context of Nepalese commercial banks, the study are going to be conducted by suing
survey methodology.
Secondary data are going to be used for the industry and company analysis. Annual report of
banks and NRB, brochures, web pages, books, business publication and government publication
are going to be the secondary sources of information.
3.2 Population and Sampling Procedure
There are all together 27 commercial banks operating in Nepal till fiscal year 2076/77. Among
these banks Siddhartha Bank limited having 186 branches till date is the population of the
study. Out of them, Siddhartha Bank Limited of Kakarvitta branch. Is considered as sample unit
using convenience sampling method. For the survey 50 questionnaires were randomly
distributed to 15 customers of each sampled bank. Out of 50, only 33 usable questionnaires
were returned for a response rate of approximately 65 percent. Out of them 8 respondents will
be loan taker and remaining 15 respondents will be account holder.
3.3 Method of Analysis
Cronbach's alpha was wont to test the reliability. The results of Cornbach's alpha value were
compared to the published estimates (Nunnaly's 0.70) for pre-existing scales employed in the
study. The calculated value is 0.75 which is larger than the published estimate of Nunnaly. It
strongly describes internal consistency estimate of reliability of summated scale. Thus, it's
claimed that the instruments employed in this research are reliable enough.
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