Enhancing Ethical Standards in Private Sector Banks: A Customer Centric Analysis of Employee Behaviour

Abstract

This study investigates the role of customer perceptions in enhancing employee ethical behaviour and customer trust in the Indian private sector banks. It proposes a customer-centred framework linking customer perceptions, ethical behaviour of employees and trust of customers. Two hypotheses were considered; ‘Customer perceptions have a positive effect on employee ethical behaviour in private sector banks’ and ‘Employee ethical behaviour has a positive effect on customer trust in private sector banks’. A quantitative, descriptive, cross-sectional design was used with convenience sampling. Data were collected from 280 customers of private sector banks using a structured Likert scale questionnaire. The questionnaire used three constructs, each with eight questions, relating to customer perceptions, employee ethical behaviour and customer trust. The measures showed acceptable reliability and convergent validity. The results indicate strong positive relationships among all three constructs. Structural equation modelling indicates that customer perceptions have a significant effect on employee ethical behaviour and employee ethical behaviour has a significant effect on customer trust. The indirect effect of customer perceptions on trust through employee ethical behaviour was also significant, thus supporting the sequential relationship and both hypotheses. The study finds that ethical behaviour at the frontline, such as honesty, transparency, fairness, confidentiality, responsible communication, accurate disclosure and procedural diligence, is not only a moral imperative but also a strategic driver of customer trust. Hence, private sector banks need to ensure that the feedback of customers is embedded into ethics audits, employee training, service standards, performance appraisal, incentive systems, complaint resolution, data privacy, and leadership oversight in order to develop an ethical culture that would enable them to retain the loyalty of customers.