The banking sector in India plays a vital role in the country’s economic development by facilitating financial transactions, mobilizing savings, and providing credit for personal and business needs. Over the past few decades, this sector has witnessed significant changes driven by liberalization, technological innovation, and increasing competition between nationalised and private banks. In Gujarat, a state with a strong industrial base and growing financial awareness among its population, banks have become central to economic activity and customer engagement. While public sector banks have traditionally dominated the market due to their extensive branch networks and government backing, private banks have rapidly gained prominence by offering personalized services, faster processing, and innovative technology-based solutions (Patel, 2012; Aishwarya, n.d.).

Figure 1: Banking Structure in India

Source: https://cracku.in/blog/banking-structure-in-india-pdf/

Customer satisfaction has emerged as a crucial measure of a bank’s effectiveness and competitiveness. It reflects not only the quality of services offered but also how well banks meet the expectations of their customers. Satisfied customers are more likely to remain loyal, use multiple banking products, and recommend the bank to others. Studies have shown that several factors including service reliability, responsiveness, transparency, technology adoption, and employee behavior directly influence customer satisfaction in both public and private banking contexts (Aishwarya, n.d.; Thakur & Devi, 2025). The effective management of these factors is essential for banks seeking to improve their customer relationships and overall performance.

The comparison between nationalised and private banks in Gujarat provides valuable insights into differences in service delivery, operational efficiency, and customer perception. Nationalised banks typically emphasize accessibility, trust, and widespread branch coverage, whereas private banks focus on customer-centric approaches, faster service, and digital innovations. Examining these distinctions helps identify the determinants that influence customer satisfaction and highlights areas for improvement in both types of banks. Understanding these differences is particularly important in Gujarat, where a growing customer base demands high-quality, efficient, and reliable banking services (Patel, 2012; Thakur & Devi, 2025).

This study, therefore, seeks to explore the determinants of customer satisfaction in both nationalised and private banks in Gujarat. By identifying the factors that affect satisfaction, the research aims to provide actionable insights for banking institutions to enhance service quality, strengthen customer relationships, and maintain a competitive edge in a rapidly evolving financial environment.

Patel (2012) conducted a study to measure customer satisfaction in public sector banks in Gujarat. The research aimed to develop a model for assessing customer satisfaction specific to public sector banks across the state. The study covered multiple public sector banks in Gujarat and identified key determinants of customer satisfaction, providing a framework to systematically evaluate service quality.

Aishwarya (n.d.) explored the determinants of customer satisfaction in the Indian banking sector. The study examined factors influencing customer perceptions of service quality across India, highlighting service efficiency, reliability, and technology adoption as significant influences on customer satisfaction.

Thakur and Devi (2025) carried out a comparative study of customer satisfaction in public versus private banks using the SERVQUAL model. The research analyzed differences in service quality perceptions and satisfaction among customers of selected banks in India. Findings indicated that private banks generally scored higher on responsiveness and assurance, whereas public banks performed better on reliability. Overall, customer satisfaction varied according to bank type and service attributes.

Chowdhury (2021) examined factors affecting customer satisfaction in public sector banks, focusing on the State Bank of India. The study aimed to identify determinants impacting customer satisfaction and covered SBI customers. Results showed that convenience, staff behavior, and technology-enabled services were major drivers of satisfaction, while delays and procedural transparency remained areas requiring improvement.

Jadeja (2018) studied customer satisfaction of banks in Gujarat to understand customer perceptions of services across the state. The research revealed that service quality, accessibility, and personal attention were key determinants, with noticeable differences between public and private banks in perceived satisfaction.

Nagar (2022) empirically examined customer satisfaction of mobile banking services in Gujarat. The study assessed how mobile banking impacts customer experiences and involved mobile banking users across the region. Findings indicated general satisfaction with the convenience and efficiency of mobile banking, though concerns about transaction security and clarity of processes were noted.

Shah and Maisuria (2018) investigated customer preferences and satisfaction with nationalized and private banks in Gujarat. The study provided a comparative view of customer satisfaction across bank types, revealing that private banks excelled in speed and personalization while nationalized banks were valued for reliability and widespread access. Satisfaction was influenced by service delivery and bank reputation.

Alshawi and Gopalappa (2021) analyzed customer satisfaction with technology-based services in selected nationalized and private banks in India. The research evaluated the effectiveness of digital banking services and found that customers were generally satisfied with technology-enabled services, although they expressed the need for enhanced security and transparency in transactions.

Kaura (2013) studied antecedents of customer satisfaction in Indian public and private sector banks. The research identified reliability, responsiveness, and assurance as strong predictors of satisfaction, with private banks performing better in responsiveness and empathy. The study covered multiple banks across India.

Bhadauriya (2022) examined customer satisfaction in public and private sector banks in the National Capital Region. The study aimed to compare satisfaction levels across bank types and found that customers valued technology-driven services and timely responses. Private banks had slightly higher satisfaction scores due to better service personalization.

Galib, Chakraborty, and Degadwala (2020) assessed customer satisfaction in private sector banks in Gujarat. The study identified efficiency, service quality, and responsiveness as key drivers of satisfaction, while customers expressed concern over transparency in fees and charges.

Senthilnathan and Sridharan (n.d.) studied customer satisfaction towards private banks in Coimbatore city. The research evaluated service quality and customer experience, finding that personalized service, timely assistance, and branch accessibility were major factors contributing to satisfaction.

Chakraborty and Chakraborty (2024) investigated customer satisfaction in selected public sector banks following the implementation of performance-linked incentives for employees. The study found that employee incentives improved staff motivation and responsiveness, which resulted in higher customer satisfaction.

Nakhuda (2016) examined factors determining customer satisfaction in Indian banking institutions. The research highlighted service reliability, trust, and employee behavior as significant influences on satisfaction, emphasizing the importance of strategic improvements in service management across banks in India.

Kumar (2022) studied customer satisfaction with SBI services in Erode city. The research evaluated customer perceptions of service quality in SBI branches and found that customers were generally satisfied with accessibility and staff behavior, though concerns remained regarding transparency and process efficiency.

2.1 Research gap

Although numerous studies have examined customer satisfaction in banking, limited research provides a comprehensive comparative analysis of nationalised and private banks specifically in Gujarat. Most prior studies focus either on a single bank type or on traditional service dimensions, with insufficient attention to the combined impact of digital banking, transparency in credit services, and changing customer expectations. Additionally, region-specific factors such as Gujarat’s diverse economic profile and growing use of technology are not adequately addressed. Therefore, there is a need for an updated, comparative study that captures both traditional and digital determinants of customer satisfaction across bank types in the Gujarat context.

3. Conceptual Framework of Customer Satisfaction

Customer satisfaction is a critical measure of how well an organization meets or exceeds the expectations of its customers. In the banking sector, it reflects the degree to which banking services fulfill customer needs and contribute to a positive overall experience. Satisfied customers are more likely to remain loyal, engage in repeated transactions, and recommend the bank to others, making customer satisfaction a vital determinant of organizational success (Chowdhury, 2021). In the context of Gujarat, understanding customer satisfaction is particularly significant due to the diverse financial needs of individuals, the increasing adoption of technology-based banking, and the competition between nationalised and private banks (Jadeja, 2018).

Figure 2: India banking-as-a-service market, 2018-2030 (US$M)

Source: https://www.grandviewresearch.com/horizon/outlook/banking-as-a-service-market/india

Several theories and models provide a framework for understanding and measuring customer satisfaction. The SERVQUAL model, developed by Parasuraman, Zeithaml, and Berry, evaluates service quality across five dimensions reliability, responsiveness, assurance, empathy, and tangibles and is widely applied in the banking sector to assess customer perceptions (Chowdhury, 2021). Another influential approach is the Expectation–Confirmation Theory, which posits that satisfaction results from the comparison between customer expectations and the perceived performance of the service. When banks meet or exceed expectations, customers are satisfied; when expectations are unmet, dissatisfaction occurs (Nagar, 2022). These models offer practical tools for assessing satisfaction and identifying areas for improvement in banking services.

In banking, the key dimensions of customer satisfaction include reliability, responsiveness, assurance, empathy, and tangibles. Reliability refers to the ability of the bank to provide accurate and consistent services, such as correct account management and timely transactions. Responsiveness reflects the willingness and speed of bank employees to assist customers effectively.

Assurance involves employees’ knowledge, competence, and ability to instill confidence in customers. Empathy is the degree of individualized attention and understanding provided to customers, and tangibles pertain to the physical facilities, technology interfaces, and appearance of bank branches (Jadeja, 2018; Nagar, 2022). Studies in Gujarat have shown that these dimensions significantly influence customer satisfaction, whether in traditional branch banking or digital/mobile banking services. For instance, Nagar (2022) found that convenience, ease of use, and security of mobile banking platforms were critical in shaping customer perceptions, while Chowdhury (2021) highlighted that interpersonal service quality and trust in public sector banks were central to customer satisfaction.

Understanding the conceptual framework of customer satisfaction is essential for comparing nationalised and private banks, as it allows for the identification of specific service attributes that drive satisfaction in different banking contexts. By applying models such as SERVQUAL and examining the core dimensions of service quality, banks in Gujarat can develop targeted strategies to enhance customer experience, improve loyalty, and remain competitive in an increasingly dynamic financial landscape.

4. Determinants of Customer Satisfaction in Banking

Customer satisfaction in banking is influenced by a variety of interrelated factors that determine how customers perceive and evaluate the services provided. One of the primary determinants is service quality, which encompasses the accuracy, reliability, and consistency of banking operations. High-quality service ensures that transactions are processed correctly, products are delivered efficiently, and customer inquiries are addressed promptly. Studies in India have shown that service quality significantly affects customer perceptions of satisfaction in both nationalised and private banks (Shah & Maisuria, 2018; Kaura, 2013).

Table 1: Banking Customer Satisfaction & Dissatisfaction (2020–2025)

Source: rbi.org.in

Figure 3: Banking Customer Satisfaction & Dissatisfaction (2020–2025)

The data indicates a substantial rise in customer complaints in the banking sector over the five-year period from 2020–21 to 2024–25, reflecting growing customer dissatisfaction and increasing engagement with formal grievance mechanisms. Complaints rose from 4,04,143 in 2020–21 to 13,34,244 in 2024–25, showing an overall upward trend with particularly sharp growth in 2022–23 and 2023–24. Initially, most grievances were related to digital and ATM transactions, followed by mobile and electronic banking issues, suggesting challenges associated with rapid digital adoption. However, in later years, the primary source of dissatisfaction shifted toward loans, advances, and credit card services especially recovery-related concerns indicating rising stress in credit management and customer–bank interactions regarding borrowing. Overall, the trend highlights that while digital banking issues triggered early complaints, credit-related services have emerged as the dominant cause of dissatisfaction in recent years, underscoring the need for improved transparency, fair recovery practices, and customer support in lending operations.

Another critical factor is employee behavior and competence. Bank staff act as the primary interface between the institution and its customers, and their knowledge, professionalism, and willingness to assist directly impact customer experiences. Competent and courteous employees not only resolve issues effectively but also build trust and confidence in the bank’s services (Alshawi & Gopalappa, 2021).

Table 2:Who are customers unhappy with? (FY 2024-25)

Figure 4: Who are customers unhappy with? (FY 2024-25)

The distribution of complaints across bank categories shows a shifting pattern in customer dissatisfaction within the financial sector. Private sector banks account for the highest share of complaints at 37.53%, with an increase compared to the previous year, indicating rising customer concerns possibly due to their large customer base, aggressive lending, and extensive digital operations. In contrast, public sector banks hold a slightly lower share at 34.80%, and their proportion has declined, which may reflect improvements in service delivery or comparatively slower growth in customer interactions. NBFCs contribute 14.80% of complaints, remaining relatively stable, suggesting consistent service issues but no major deterioration. Small finance banks account for a smaller share of about 4.5%, yet they have experienced significant volume growth in complaints, highlighting emerging challenges as these institutions expand their outreach. Overall, the data suggests that while private sector banks dominate in complaint share, rising grievances in smaller and rapidly growing institutions point to the need for stronger customer service systems across the entire financial ecosystem.

The adoption of technology and digital services has become increasingly important in shaping customer satisfaction. Mobile banking, online portals, and ATM services offer convenience and speed, allowing customers to perform financial transactions with minimal effort. Research indicates that the effective use of technology enhances customer satisfaction, particularly among younger and tech-savvy clients, while also reducing operational bottlenecks for banks (Alshawi & Gopalappa, 2021).

Accessibility and convenience are also significant determinants. The ease with which customers can access bank branches, ATMs, and digital platforms affects their overall satisfaction. Factors such as branch location, operating hours, queue management, and the availability of online alternatives contribute to customer perceptions of convenience (Shah & Maisuria, 2018).

Transparency and trust in financial transactions play a key role in ensuring customer confidence. Customers are more satisfied when banks provide clear information regarding account statements, fees, interest rates, and policies. Lack of transparency can lead to dissatisfaction, even if other service dimensions are strong (Kaura, 2013).

Finally, pricing, fees, and cost-effectiveness influence customer satisfaction. Competitive interest rates, reasonable service charges, and perceived value for money contribute to a positive banking experience. Customers often compare these financial aspects across different banks, making them an important determinant of overall satisfaction (Shah & Maisuria, 2018; Kaura, 2013).

Together, these determinants provide a comprehensive framework for understanding the factors that influence customer satisfaction in nationalised and private banks. By addressing these areas effectively, banks can enhance customer loyalty, improve service experiences, and maintain a competitive edge in a rapidly evolving financial sector.

5. Comparative Perspective: Nationalised vs Private Banks

Nationalised and private banks in India differ significantly in their approaches to service delivery and operational efficiency. Public sector banks, often characterized by extensive branch networks and legacy systems, prioritize accessibility, regulatory compliance, and trust. While these banks have the advantage of a broad presence, their service delivery is sometimes slower due to procedural formalities and high customer volumes. In contrast, private banks emphasize efficiency, personalized customer interactions, and technology-enabled services. They typically adopt advanced digital platforms, streamlined processes, and faster response mechanisms, which enable them to provide quicker services and a more customer-centric experience (Bhadauriya, 2022).

Figure 5: Nationalised vs Private Banks

Source: https://www.iasgyan.in/blogs/corporates-as-bankers-boon-or-bane

Customer expectations also vary between the two types of banks. Clients of nationalised banks often expect reliability, security, and widespread access, while private bank customers place higher importance on responsiveness, personalized attention, and convenience, particularly through digital and mobile banking channels. This divergence reflects the differences in operational models and service philosophies, with private banks leveraging technology and innovation to meet modern customer needs more effectively (Galib, Chakraborty, & Degadwala, 2020).

Studies conducted in Gujarat reveal notable trends in customer satisfaction across bank types. Research indicates that while nationalised banks score higher on trust and reliability due to their established reputation and government backing, private banks consistently achieve higher satisfaction scores in areas such as responsiveness, ease of transactions, and service personalization. For example, Galib et al. (2020) found that customers valued faster digital services and personalized support in private banks, whereas public banks were preferred for their stability and perceived security. Similar findings from Senthilnathan and Sridharan (n.d.) in Coimbatore suggest that private banks excel in meeting customer expectations related to convenience and timely service, contributing to higher satisfaction ratings among their clientele.

Overall, comparing nationalised and private banks highlights the complementary strengths of each banking model. Understanding these differences is essential for banks seeking to improve customer satisfaction, as well as for policymakers aiming to enhance the efficiency and quality of banking services in Gujarat. By leveraging their respective strengths trust and reliability for nationalised banks, and efficiency and personalization for private banks financial institutions can develop targeted strategies to address diverse customer expectations and strengthen overall satisfaction (Bhadauriya, 2022; Galib et al., 2020; Senthilnathan & Sridharan, n.d.).

6. Challenges and Opportunities in Enhancing Customer Satisfaction

Banks in Gujarat face several challenges in maintaining and improving customer satisfaction, particularly in the public sector. Common issues include delayed service delivery, limited personalization, procedural rigidity, and employee inefficiencies. Chakraborty and Chakraborty (2024) highlight that even after the implementation of performance-linked incentives for employees, certain public sector banks continue to struggle with responsiveness and timely resolution of customer queries. These challenges can undermine customer trust and loyalty, particularly when private banks offer faster, more flexible, and technology-driven services. Additionally, limited awareness of digital banking tools among certain customer segments can reduce engagement and satisfaction, especially in semi-urban and rural areas (Nakhuda, 2016).

At the same time, emerging trends present significant opportunities for banks to enhance customer satisfaction. The adoption of digital banking services, mobile applications, and online portals has transformed how customers interact with banks. These technologies facilitate quick transactions, 24/7 access to account information, and more efficient handling of payments, significantly improving convenience and customer experience. Furthermore, the use of Customer Relationship Management (CRM) systems allows banks to collect and analyze customer data, personalize offerings, and proactively address grievances (Kumar, 2022). Private banks have been quicker to leverage these innovations, providing lessons for public sector banks seeking to modernize their operations.

Strategic recommendations to enhance customer satisfaction in Gujarat include a combination of technology adoption, staff training, and process optimization. Banks should focus on improving the digital literacy of customers and promoting mobile and online banking platforms to increase adoption. Employee skill development programs can enhance responsiveness, empathy, and service quality, directly impacting customer perceptions. Moreover, integrating feedback mechanisms and leveraging CRM analytics can help banks identify pain points, personalize services, and maintain consistent engagement with clients. By addressing operational challenges and embracing digital and customer-centric strategies, banks in Gujarat can improve overall satisfaction, strengthen loyalty, and maintain competitiveness in a rapidly evolving financial environment (Chakraborty & Chakraborty, 2024; Nakhuda, 2016; Kumar, 2022).

7. Summary and Implications

The study examines the determinants of customer satisfaction in nationalised and private banking sectors with specific reference to Gujarat, highlighting the evolving dynamics of India’s banking environment shaped by liberalization, technological advancement, and intensified competition. It emphasizes that customer satisfaction is a key indicator of a bank’s performance, loyalty generation, and long-term sustainability. The literature indicates that while nationalised banks benefit from trust, accessibility, and extensive branch networks, private banks tend to excel in responsiveness, efficiency, personalization, and technology-driven services. Core determinants influencing satisfaction across both sectors include service quality, employee competence, digital adoption, accessibility, transparency, trust, and pricing. Conceptual models such as SERVQUAL and Expectation–Confirmation Theory provide a framework for understanding how customers evaluate banking services based on expectations and perceived performance.

Empirical evidence shows rising customer complaints in recent years, with dissatisfaction shifting from digital transaction issues to credit-related services such as loans and recovery practices. Private sector banks account for a larger share of complaints due to their rapid growth and extensive digital operations, whereas public sector banks show relatively declining complaint proportions. Comparative studies in Gujarat reveal that customers value reliability and security in nationalised banks, while they prefer private banks for speed, convenience, and personalized service. The study also identifies key challenges faced by banks, including procedural delays, limited customization, technological gaps among certain customer groups, and service inefficiencies. At the same time, emerging opportunities such as mobile banking, digital platforms, CRM systems, and staff training offer pathways to enhance customer experience.

Overall, the study concludes that improving customer satisfaction requires a balanced strategy combining technological innovation, service quality enhancement, transparency, and customer-centric practices. Leveraging the strengths of both banking models trust and reach of nationalised banks and efficiency and innovation of private banks can help financial institutions in Gujarat better meet diverse customer expectations and remain competitive in a rapidly transforming financial landscape.

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