This study deals with the measurement of service quality of banks in India. It investigates the discrepancy between customers' expectations and perceptions towards the quality of services. The study was conducted using the SERVQUAL instrument. The results indicate that the sample population has perceptual problems with their banking service experiences.

Achieving and maintaining a commanding position in the marketplace is becoming increasingly difficult in a wide variety of industries because of growing competition on the one hand and more demanding customers on the other. Companies aggressively marketing their offerings at attractive prices will gain no more than a temporary advantage by competing exclusively on the basis of product features and price-attributes that rivals can equally compete. This is not sustainable in an era characterized by accelerating competition and increasingly knowledgeable customers. In contrast, competing on the basis of superior customer servicean intangible, difficult to imitate component of a company's overall market offeringoffers a solid foundation on which companies can erect an enduring competitive advantage.

Service organizations ranging from small business owners to large companies are constantly seeking unique ways to differentiate their offerings. The willingness and ability of managers in service firms to respond to changes in the service economy will determine whether their organizations survive and prosper. With so many changes occurring in the Indian service industries, which includes an expansion and intensification of competition and increasing customer sensitivity, the issue of service quality has gained considerable currency (Johnson and Sirikit, 2002).

During the last decade of service quality research, Parasuraman et al. (1985) have reported that excellent service is a profitable strategy because it results in more new customers, more business with existing customers, fewer lost customers, more insulation from price competition, and fewer mistakes requiring reperformance of service. Profit Impact of Market Strategy (PIMS) research has indicated that companies that offer superior service are able to charge 8% more for their products (Gale, 1992), while achieving higher-than-normal market share growth (Buzzell and Gale, 1987) and profitability (Philips et al., 1983).