All the banks in India offer similar kind of services, but may vary in terms of service quality. This paper analyzes the gap between customer expectation and customer perception in the service delivery of retail banks. A sample of 200 customers from 10 top performing banks of Hissar city in Haryana were selected for the study. The responses of the customers were analyzed with the help of factor analysis, and seven factors were extracted. The results show that there is a huge gap between perception and expectation in the case of tangibility dimension of service quality and low in the case of competency. The study suggests that the banks should improve their service quality towards tangibility to maximize customer satisfaction.

From the marketers’ perspective, service quality is the level of service attributes needed to make the service acceptable and profitable in the marketplace, thus satisfying the marketers’ needs for profitability and economic success. On the other hand, customers view service quality as equivalent to the level of service attributes required to satisfy their own needs and requirements. In this respect, marketers try to define service quality in advance, while customers make evaluations during and after use of services.

Due to the characteristics of service, the principles and practices of product quality control cannot be used for assessing service quality. To assess the quality of services and form an impression about the relative inferiority or superiority of a service provider and its services, customers compare the level of the service delivered to them with their own personal expectations, shaped by their past experience (Grönroos, 1982 and 1984; Lehtinen and Lehtinen, 1982; Lewis and Booms, 1983; and Bitner and Hubert, 1994). Grönroos (1982 and 1984), Takeuchi and Quelch (1983), and Parasuraman et al. (1985 and 1988) named the result of this comparison as Perceived Service Quality. However, Parasuraman et al. (1988) explained the perceived service quality as the customer’s global attitude or judgement “related but not equivalent to satisfaction” of the overall excellence or superiority of a service. However, Berry et al. (1988) opined that what counts in services is the conformance to the wishes of customers rather than to any predetermined set of specifications.