Quality service and customer satisfaction are major challenges faced by the banking sector in Oman. This paper aims to comparative study of the factors affecting service quality in local and foreign banks in Oman. The quality of service provided in the service sector is of utmost importance in order to sustain in a competitive market. As far banking sector in Oman is concerned, the various policies are adopted by the banks to improve the service quality that includes e- banking, Phone banking, making available CDM (Cash deposits Machines) and ATM (Automated Teller Machines), easy loans, customer care service etc. This research paper is an attitudinal study of customers of two local and foreign banks in Oman. The customer feedback is collected through structured questionnaire, based on the five points Likert scale. The parameters of servqual model have been followed to test the service quality in the banks. An attempt has been made to explore and analyze the significant factors affecting the service quality of banks in Oman by using descriptive and inferential statistics. The key findings of the study are the level of customer satisfaction of local banks is better than the foreign banks in Oman. This is because of the quality of service provided by the local bank is better than foreign banks.