Purpose: The purpose of this paper is to gaugethe importance of service quality and to analyze its impact on customer relationshipof banking sector in order to capture the competitive market and to be as a leading service sector in country’s growth. Design/Methodology/Approach: Closed questionnaire was usedfor measuring the service quality of banking sector using five point Likert’s scale. Questionnaire were distributed and collected in Ampara district. The conclusion was made by Pearson correlation, ANOVAs and regression analysis. Findings- The results revealed that service quality not only has a significantly positive relationship with customer relationships but also has a significant impact on customer relationships. Practical implication: the research has much more implication in the efforts taken by the banks in attracting new customers retaining the existing customers,building up a good relationship and in banking sector. It also has indirect implications as increased service quality can lead to increased employee performance and reduced turnover ratio. Originality/value: The bank managers,government and the other stakeholders are expected to realize the importance of service quality and build a good customer relationship in the current context of emerging many new financial institutions.