Retention Behavior and Service Quality Dimensions: A Study of Rural Customers of Public Sector Banks

Abstract

In current Indian banking dynamics, especially in rural areas, customer retention has emerged as a vital strategic objective for public sector bank (PSBs). The competitive environment, increasing customer expectation, and the digital transformation of bank service has made essential for banks not only to attract also to retain customers. Retention behavior, which refers to customer continuing their relationship with bank, is significantly influenced by the quality of service provided. This study examines the interrelationship between service quality dimensions and customer retention behavior among rural customer of public sector banks in India.

Using SERVQUAL method as the foundation, this research investigates how five key dimensions of service quality – tangibility, reliability, responsiveness, assurance, and empathy – Impact the retention decisions of rural banking customers. The study was conducted using a structured questionnaire distributed among the sample of rural customers who hold accounts with major public sector banks. Data collected was analyzed using statistical told such as correction, regression, and factor analysis to determine the strength and nature of the relationship between service quality and retention behavior.

The findings of the study also reveal that when all dimensions of service quality contribute to customer satisfaction and retention, certain dimensions, notably reliability and empathy have a stronger influence in rural context. The lack of digital literacy, emotional trust is branch level staff, and limited access to alternate banking options underscore the importance of requirement of personalized and dependable services in rural areas. However, the study identifies communication gaps, infrastructure inadequacies, and service delays as major barriers of achieving higher retention levels.

This paper provides actionable insights for public sector banks to enhance service delivery in rural regions. Strategies such as staff training, Infrastructural improvements, community engagements, and education programs for customers can significantly improve the service quality and thereby strengthen customer loyalty.

Focusing on the unique needs expectations of rural customers, this study contributes to the broader discourse on inclusive banking and sustainable financial development. This offers valuable insights for policymakers, banking practitioners, and researchers aiming to enhance customer satisfaction and build a long-term relationship in the underbanked rural segment of India.