SERVICE QUALITY MEASUREMENT

ICICI BANK V/S AXIS BANK

Earlier banks were conservative in their approach but the

liberalization of the banking sector has resulted in an
enhanced efficiency: With a growth in the Indian economy
especially in its services sector, the demand for banking
services has grown strong. There was an expansion/ greater
competition and diversification of ownership of banks. Today,
easier access to knowledge, increased and broad based use of
Technology and rapid introduction of innovative customized
products to meet the customer demands are the key features
of the changing banking scenario.

INTRODUCTION

There was a time when it was believed in that industrial

revolution was the only solution to social problems such as
poverty and unemployment. Now, however, the services
sector promises to fulfil the task. Services touch the lives of
every person everyday be it in the field of food services,
communication, leisure services or financial services, to name
a few. Our welfare and the welfare of our economy are now
based on services. Services lie at the very hub of economic
activity in any society. No wonder that the services sector will
be the biggest driver of new economic growth and profit
earner in the new millennium for the world in general and
India in particular. The services sector can best be
characterized by its diversity.
According to Kotler, "A service is an activity or benefit that
one party can offer to another which is essentially intangible
and does not result in the ownership of anything. Its
production may or may not be tied to a physical Product".
When a customer buys a service in the service market, he
buys time, knowledge, skill or resources of someone else who
is the provider or supplier of the service.
 The services sector plays an important role in the
development of the country. Studies have shown that the
employment elasticity (to GDP Growth) in the services sector
is higher than that in both the agriculture and manufacturing
sectors; therefore, the growth of services sector helps in the
generation of employment opportunities in the country. The
services sector by providing complementary services to
industry and agriculture acts as catalyst in the growth of the
entire economy.

The services sector has emerged as the largest contributor to

the country's GDP and grew faster than the agriculture and
industrial sector. In the year 1993-94 the agriculture sector
had 26.5% share in the real GDP which was reduced to 20.5%
in the year 2004-05. Similarly, the industrial sector had 22.1%
share in real GDP in the year 1993-94 which was reduced to
21.9% in 2004-05. While in the case of the services sector, its
share in the real GDP increased from 50.5% in the year 1993-
94 to 57.6% in 2004-05 In 2007-2008 it has touched a high of
around 67%.

Evolution of Banks

The Banking originated in India during the first decade of the

18th century. The first bank which came into existence in 1786
was 'The General Bank of India'. Later, Bank of Hindustan
followed it. Now both these banks are dysfunctional. In June
1806, 'The Bank of Calcutta' came into existence, which is now
known as State Bank of India. It is the oldest bank in existence.
The first fully Indian-run bank was the Allahabad Bank set up in
1865. By the 1900s the market expanded with the
establishment of banks like Punjab National Bank in Lahore in
1895, Bank of India in Mumbai in 1906, both of which were
founded under private ownership. The Indian banking sector
came to be formally regulated by the Reserve Bank of India
(RBI) from 1935. After India's Independence in 1947, the RBI
was nationalized and given broader powers.

The banking sector plays a significant role in the economic

development of the country. The size and composition of
banking transactions mirror the economic happenings in the
country.

In the private sector Axis Bank and ICICI bank are among the
major players. We have conducted a survey to study the
service quality of both these banks using the servqual
questionnaire method.

AXIS BANK
Axis Bank was the first of the new private banks to have begun
operations in 1994, after the Government of India allowed new
private banks to be established. The Bank was promoted jointly
by the Administrator of the specified undertaking of the Unit
Trust of India (UTI - I), Life Insurance Corporation of India (LIC)
and General Insurance Corporation of India (GIC) and other four
PSU insurance companies, i.e. National Insurance Company
Ltd., The New India Assurance Company Ltd., The Oriental
Insurance Company Ltd. and United India Insurance Company
Ltd.

The Bank today is capitalized to the extent of Rs. 358.56 crores

with the public holding (other than promoters) at 57.57%.

The Bank's Registered Office is at Ahmedabad and its Central

Office is located at Mumbai. Presently, the Bank has a very
wide network of more than 712 branch offices and Extension
Counters. The Bank has a network of over 2904 ATMs providing
24 hrs a day banking convenience to its customers. This is one
of the largest ATM networks in the country.

The Bank has strengths in both retail and corporate banking

and is committed to adopting the best industry practices
internationally in order to achieve excellence.
 ICICI BANK
Overview

ICICI Bank is India's second-largest bank with total assets of Rs.

3,849.70 billion (US$ 82 billion) at September 30, 2008 and
profit after tax Rs. 17.42 billion for the half year ended
September 30, 2008. The Bank has a network of about 1,400
branches and 4,530 ATMs in India and presence in 18 countries.
ICICI Bank offers a wide range of banking products and financial
services to corporate and retail customers through a variety of
delivery channels and through its specialised subsidiaries and
affiliates in the areas of investment banking, life and non-life
insurance, venture capital and asset management. The Bank
currently has subsidiaries in the United Kingdom, Russia and
Canada, branches in United States, Singapore, Bahrain, Hong
Kong, Sri Lanka, Qatar and Dubai International Finance Centre
and representative offices in United Arab Emirates, China,
South Africa, Bangladesh, Thailand, Malaysia and Indonesia.
Our UK subsidiary has established branches in Belgium and
Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock

Exchange and the National Stock Exchange of India Limited and
its American Depositary Receipts (ADRs) are listed on the New
York Stock Exchange (NYSE).

History

ICICI Bank was originally promoted in 1994 by ICICI Limited, an

Indian financial institution, and was its wholly-owned subsidiary.
ICICI's shareholding in ICICI Bank was reduced to 46% through a
public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000,
ICICI Bank's acquisition of Bank of Madura Limited in an all-
stock amalgamation in fiscal 2001, and secondary market sales
by ICICI to institutional investors in fiscal 2001 and fiscal 2002.
ICICI was formed in 1955 at the initiative of the World Bank, the
Government of India and representatives of Indian industry. The
principal objective was to create a development financial
institution for providing medium-term and long-term project
financing to Indian businesses. In the 1990s, ICICI transformed
its business from a development financial institution offering
only project finance to a diversified financial services group
offering a wide variety of products and services, both directly
and through a number of subsidiaries and affiliates like ICICI
Bank. In 1999, ICICI become the first Indian company and the
first bank or financial institution from non-Japan Asia to be
listed on the NYSE.

After consideration of various corporate structuring alternatives

in the context of the emerging competitive scenario in the
Indian banking industry, and the move towards universal
banking, the managements of ICICI and ICICI Bank formed the
view that the merger of ICICI with ICICI Bank would be the
optimal strategic alternative for both entities, and would create
the optimal legal structure for the ICICI group's universal
banking strategy. The merger would enhance value for ICICI
shareholders through the merged entity's access to low-cost
deposits, greater opportunities for earning fee-based income
and the ability to participate in the payments system and
provide transaction-banking services. The merger would
enhance value for ICICI Bank shareholders through a large
capital base and scale of operations, seamless access to ICICI's
strong corporate relationships built up over five decades, entry
into new business segments, higher market share in various
business segments, particularly fee-based services, and access
to the vast talent pool of ICICI and its subsidiaries. In October
2001, the Boards of Directors of ICICI and ICICI Bank approved
the merger of ICICI and two of its wholly-owned retail finance
subsidiaries, ICICI Personal Financial Services Limited and ICICI
Capital Services Limited, with ICICI Bank. The merger was
approved by shareholders of ICICI and ICICI Bank in January
2002, by the High Court of Gujarat at Ahmedabad in March
2002, and by the High Court of Judicature at Mumbai and the
Reserve Bank of India in April 2002. Consequent to the merger,
the ICICI group's financing and banking operations, both
wholesale and retail, have been integrated in a single entity.

RATIONAL
The Banking space in India is becoming highly competitive day
by day so it is necessary to know the level of satisfaction which
the consumers/customers derive by using the service of a
particular bank. By knowing the level of satisfaction we can
know the preferences of the customers and can recommend
the outcomes to the Bank authorities and even can use the
outcomes to know better the customer expectations and help
them serve better.

METHODOLOGY.

We have conducted a survey using the servqual questionnaire

method with a sample size of 100. The Servqual method
typically measures the service quality of any service
organization with respect to five dimensions i.e.

1. Tangible

2. Reliability

3. Responsiveness

4. Assurance

5. Empathy

Service quality is more difficult to define and measure than is

the quality of tangible goods. Business executives rank the
improvement of service quality as one of the most critical
challenges facing them today.
Customers evaluate service quality by the following five
components.
Tangibles

The physical evidence of the service. The tangible part of the

service includes the physical facilities, tools and equipments
used to provide the service such as a doctor’s office or an
ATM.

Reliability

The ability to perform the service dependably, accurately and

consistently. Reliability is performing the service right the first
time. This component has been found to be the one most
important to customers

Responsiveness

The ability to provide prompt service. Examples of

responsiveness include calling the customer back quickly,
serving lunch fast to someone who is in a hurry or mailing a
transaction slip immediately.

Assurance

The knowledge and courtesy of employees and their ability to

convey trust. Skilled employees who treat customers with
respect and make consumers feel that they can trust the firm
exemplify assurance.

Empathy

Carrying individualized attention to customers. Firms, whose

employees recognize customers, call them by name and
teach their customers specific requirements are providing
empathy.
 For the study, twenty two questions have been used to
identify the service Gap. A seven point likert scale is used to
measure the customer expectation and perception across the
five dimension of the study.

The servqual instrument used for the study is as under:

Following are the steps used to analyze the service

quality
 1. We have Selected Axis bank and ICICI bank for assessing
the service quality. Using the SERVQUAL instrument, we
have first obtained the score for each of the 22
expectation questions. Next, a core for each of the
perception questions has been obtained. We have
calculated the Gap Score each of the statements (Gap
Score = Perception – Expectation).

2. Next an average Gap Score for each dimension by

assessing the Gap Scores for each of the statements that
constitutes the dimension and dividing the sum by the
number of statements making up the dimension has been
obtained.

Table 1 gives the details about the Gap scores of all the
dimensions.

In Table 2 the importance of weights for each of the five

dimensions constituting the servqual scale has been shown.
These weights are assigned according to the suggestions made
by the bank customers.

Finally, the total of all the five dimensions average score is

multiplied with respective weights.

The RESULTS of the survey are shown in Table 1 and

Table 2.

(Table 1 and 2)
 Discussion and Conclusions

Thus we can see that the highest Gap score in case of ICICI
Bank arises in case Reliability and Responsiveness
dimensions. This is a matter of concern for ICICI Bank and
reflects the need for service improvements in these areas. It
can be seen that the customers undoubtedly expect more
from the Reliability and Responsiveness dimension.

Low score for Tangibles, Assurance and Empathy reveals that

customer is happy with the existing aesthetics and is not
expecting more. As far as dealing with the customers is
concerned ICICI Bank is good at maintaining healthy
customer relations and creating trust among the customers.
However when it comes to performing core banking services
ICICI Bank loses the race as it has maximum Gap score, as
stated above, in Reliability and Responsiveness dimension. It
is clear from the score that the customers do not attach any
importance to these dimensions. This probably may be due
to infrequent interaction of customers with service providers.

Talking about Axis Bank, individually it has the same scenario

as is the case with ICICI Bank; i.e. The highest Gap score is in
case of Reliability and Responsiveness dimensions. Again this
is a matter of concern for Axis Bank as well. These are the
dimension which reflect core banking services for which a
customer would have high hopes. High Gap scores in these
areas indicate that the Bank needs to improve its facilities in
these dimensions.

Again for the dimensions of Tangibles, Assurance and

Empathy, the Gap scores are comparatively less. The
customers probably expect less or the existing facilities in
these dimensions of the Bank meet the customer’s
expectations. So this is not a matter of great concern for Axis
Bank. As far as aesthetics and customer relationship is
concerned Axis Bank is good at these dimensions.

So, we can say that both the Banks do not have similar kind
of results but however the results are very close to each
other.
An important point to be noted here is that though both the
Banks individually show similar kind of results there are wide
differences when they are compared with each other.

Both the Banks have high Gap scores in Reliability and

Responsiveness dimension; which means that the customers
expect the most out of these dimension but they do not
receive the expected services. The Gap score for
Responsiveness is highest in case of Axis Bank; however,
when compared with ICICI Bank it is very less. So is the case
with the Reliability dimension. Both the Banks have high Gap
scores in these dimensions, but Axis Bank again leads the
race. The Gap score for Reliability dimension in case of Axis
Bank is 50% of Reliability Gap score for ICICI bank.
When it comes to Tangibles, both the banks seem to be
having low Gap scores but ICICI bank in this case leads the
race. The Tangible Gap score for ICICI Bank is comparatively
less when compared with Axis Bank.

When it comes to Assurance, Axis Bank’s Gap score is only

60% of Gap score of ICICI’s assurance gap score.

Though maintaining good customer relationship and

providing with modern facilities, aesthetics forms an
important part of any banking industry, any Bank should not
lag behind when it comes to providing core Banking facilities.
Taking this fact into consideration, AXIS Bank provides better
services than ICICI Bank.

********

QUESTTINAIRE

THE SERVQUAL INSTRUMENT

EXPECTATIONS
PERCEPTIONS

This survey deals with your

opinions of banks. Please
show the extent to which you
think banks should posses the
following features. What we
are interested in here is a
number that best shows your
expectations about institutions
offering bank services
The following statements relate
to your feelings about the
particular bank AXIS/ICICI you
chose. Please show the extent
to which you believe
AXIS/ICICI has the feature
described in the statement.
Here, we are interested in a
number that shows your
perceptions about AXIS/ICICI
bank

Strongly
Strongly
Strongly
Strongly

Disagree
Agree
Disagree
Agree

1 2 3 4
5 6 7
1 2 3 4
5 6 7
 Average Assurance
SERVQUAL score

Empathy

Empathy

E18. Excellent banks

will give customers
individual attention.

P18. AXIS/ICICI bank

gives you individual
attention.

E19. Excellent banks

will have operating
hours convenient to
all their customers.

P19. AXIS/ICICI bank

has operating hours