Service Quality and Customer Loyalty in Nepalese Commercial Banks: A Mediating Role of Customer Trust

Service quality assessment is crucial for ensuring that the overall service dimension aligns with the client's expectations. This study aims to examine the mediating effect of customer trust in the relationship between service quality and customer loyalty in the commercial banks of Nepal. Two hundred and sixteen (216) customers of these banks were surveyed using a structured five-point Likert scale questionnaire. Data was collected via online and field survey by visiting the customers at related banks. The study's hypotheses were tested through path analysis using AMOS-26 software. The findings reveal a significant positive relationship between service quality, customer trust, and customer loyalty. This suggests that higher service quality contributes to heightened customer trust and loyalty in Nepalese commercial banks. Notably, customer trust exhibits a partial mediation effect in the connection between service quality and customer loyalty. These results offer valuable insights for bank managers, emphasizing the importance of prioritizing customer satisfaction, trust and loyalty in crafting strategies for competitive advantages.