The IUP Journal of Applied Economics
The Impact of New Generation Private Sector Banks on Public Sector Banks in India

Article Details
Pub. Date : April, 2020
Product Name : The IUP Journal of Applied Economics
Product Type : Article
Product Code : IJAE30420
Author Name : D Sreenivasa Chary
Availability : YES
Subject/Domain : Economics
Download Format : PDF Format
No. of Pages : 16



The study attempts to examine the differences between the performance of Public Sector Banks (PSBs) and that of New Generation Private Sector Banks (NGPSBs) and also the impact of the latter on the performance of the former in terms of customer service and service quality. To assess the customer perception on service quality provided by the banks, SERVQUAL/SERVPERF questionnaires were administered on a sample of 1,075 respondents across the states of Telangana, Andhra Pradesh and Maharashtra. Factor analysis was done to understand the factors that influence customer service, service quality and customer satisfaction. The elimination exercise performed iteratively in factor analysis resulted in retaining of 14 variables out of 22, grouped into four factors, namely, efficacy, empathy, expertise and efficiency. The results unequivocally proved that NGPSBs do influence the performance of PSBs.


The banking sector, which was once dominated by the nationalized and Public Sector Banks (PSBs), was opened for the new generation private sector banks for enhancing competition since 1991. The new generation private sector banks are tech-savvy and 100% computerized banks. These banks gave a tough competition to the PSBs which were operating till then as extended hands of government for accepting deposits of money from public for lending and investment, following the traditional security-oriented norms and priority sector lending norms as a part of social lending activity. Capital adequacy norms introduced subsequent to 1991 warranted these banks also to be viable to survive. Moreover, the Reserve Bank of India (RBI) guidelines on customer service enabled the customers to become aware of their rights, and the duties and limitations of bankers. All these changes in the industry necessitated the PSBs to increase their efficiency to withstand the competition from the new generation private sector banks and retain the customer base.

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