Chapter 4 Business services

Business services refer to those services which are used by business

enterprises to conduct their activities.
Type of Business Services:
I. Banking
II. Insurance
III. Communication
IV. Transportation
V. Warehousing
Goods vs Services
 Goods are physical products, which can be delivered to a purchaser and involves
transfer of ownership from seller to customer. However,, services are intangible
and provide satisfaction of wants and are not necessarily linked to the sale of a
product or another service.
 Nature of services :
I. Intangible :Unlike goods, services are intangible, they do not have any
physical existence and cannot be touched.
II. Inconsistency: As services are intangible, they have to be performed
exclusively each time. Different customer have different requirements and
expectations.
III. Inseparability: Services cannot be separated from their providers or sellers.
IV. Inventory: Services are consumed as soon as they are delivered . It means ,
they cannot be stored for a future use.
V. Involvement: The involvement of customer is necessary for delivery of
service . It provides the opportunity to the customer to get the services modified
according to his requirements.
Banking
 Bank is a financial Institution which accepts money on deposits repayable on demand
and also earns a margin of profits by lending money.
 Type of Bank Accounts:
I. Saving account : Saving account is the account meant for people who wish to
save a part of their income to safeguard the future and earn interest on the
saving
II. Current Account : Current Account is opened by businessmen who have a
number of regular transactions with the bank , both deposits and withdrawals .
III. Fixed Deposit Account : Fixed Deposit Account is an account in which the
amount with the bank for a fixed period of time .
IV. Recurring deposit Account : Recurring deposit account is opened by those who
want to save regularly for a certain period Of time and earn a higher interest
rate.
V. Multiple Option Deposit Account : MOD account interlinks the saving bank
account with a deposit account and any amount in excess of a pre – determined
amount is automatically transferred to a fixed deposit.M
Banking Services
 Bank Draft : Bank Draft is an order issued by a bank on any Branch of the Same bank to
pay the specified amount to the person named in it.
 Banker’s Cheque (pay order) : Banker’s cheque is almost like a bank draft. It refer to
that bank draft which is payable within the town.
 Real Time Gross Settlement (RTGS):RTGS system is an online system for transferring
funds in which transfer of money takes place from one bank to onther on a real time and
on gross basis.
 National Electronic Funds Transfer (NEFT): NEFT system is an online system for
transferring funds in which transfer of money takes place from one bank to another on
net basis.
 Bank Overdraft : It refers to a facility in which a customer is allowed to overdraw his
current account up to an agreed limit.
 Cash Credits : Cash Credit refers to a loan given to the borrowed against his current
assets like shares, stocks, bonds , etc.
Electronic Banking OR e – Banking
Meaning of e – Banking : Electronic Banking is a service provided by many banks ,
in which a customer is allowed to conduct banking transactions over the internet
using a personal computer , mobile telephone or handheld computer.
Benefits of e – Banking to Customer :
1.It facilitates digital payments and promotes transparency in the financial
statement.
2.It provides 24 hours, 365 days a year services to the customers of the bank.
3. It inculcates a sense of financial discipline by recording each and every transaction.
Benefits of e- banking to Banks:
1.It provides competitive advantage
2. The network of banks is not limited to the number of branches. It expands far and
wide due to facility of internet banking.
Type of Digital payments
1 . Banking Cards:
(i)Debit Cards: Debits Cards is an electronic card issued by a bank which allows the bank client access
to his account to withdraw cash or pay for goods and services.
(ii)Credit Cards: Credits Card is an electronic card issued by a financial institution authorising the
holder to buy goods and services on credits.
2.Aadhaar Enabled payment System(AEPS):Itch can be used for all banking transactions such as balance
enquiry, cash withdrawal , cash deposit, payment transaction , Aadhaar to Aadhaar fund transfers
,etc.
3.Unified payment Interface(UPI):Under this system, any customer holding any bank account can send
and receive money through a UPI – based app.
4. Micro ATM : It is a mini version of an ATM. Micro ATMs are like modified point of sales terminal,
which can connect to banking network via GPRS to perform banking transactions.
5.Mobile Wallets: It is a type of virtual wallet service that can be used by downloading an app.
Internet Banking: Internet Banking refers to making banking transactions directly with the banks
through the internet.
6.Bharat Interface for Money Apps(BHIM): It allows users to make payments using the UPI application.M
INSURANCE
 Insurance is a contract between two parties, whereby one party agrees to
indemnify the loss suffered by the other party for a consideration of some
money, known as premium.
I. The party which promises to indemnity the loss is called ‘Insurer’
II. The persons or the property subject to risks is called ‘Insured’
III. The agreement providing for insurance is called an ‘Insurance
Functions of Insurance
 Providing : Insurance cannot remove the uncertainty involved in the business. However
it provides certainty of payment for the risk of loss.
 Protection : Insurance cannot stop the happening of a risk .However , it gives protection
against risk of a probable loss that may arise due to happening of an uncertain event ,
like fire , theft, natural calamities, etc.
 Risk Sharing : Insurance is an arrangement, in which large number of people, who are
exposed to the same risk, contribute to a fund , maintained by the insurance company.
 Assist Capital Formation : The funds collected by the insurance company in the form pf
premium, are invested by them in various income generating schemes.
Principles of Insurance
1. Utmost Good Faith: A contract of insurance is a contract of ‘uberrimae fider’, a contact found
on utmost good faith.
2. Insurable Interest : The insured must have an insurable interest in the subject matter of
insurance . Insurable interest means some pecuniary interest in the subject matter of insurance
contract.
3.Indemnity : The term ‘indemnity’ means security against loss. The purpose of this principle is to
put the insured, in the event of loss, In the same position that he occupied immediately before
the happening of the event.
4.Subrogation: According to this principle, the insurer gets all the rights against the third party
with respect to the subject – matter insured, after compensating the loss of the insured.

5. Proximate Cause: Causes of loss may be two kinds (a) Insured Perils and (b uninsured perils.
According to this principle , the insurer is liable for the loss only when such loss is proximate
caused by the perils, which are stated in the policy.
6.Contribution: According to this principle, insurer who has paid the claim amount under an
insurance policy has the right to recover the proportionate contribution from the other insurer.
7.Mitigation : According to this principle, It is the duty of the insured to take reasonable steps to
minimise the loss or damage to the insured property
Functions of commercial Banks
 Acceptance of Deposits: Accepting deposits from public is the main function of a
bank. It mobilises surplus funds from the public . Some people deposit money in the
banks for the purpose of safety.
 Lending of funds: The deposits received by banks are not allowed to remain idle. So,
after keeping certain cash reserves, the balance is given as loans and advances in the
form of overdrafts, cash credits, discounting trade bills, term loans, consumer credits
and other miscellaneous advances.
 Cheque Facility: A cheque is a credit instrument which is used to withdraw money
from the banks. It is most convenient and an inexpensive medium of exchange.
 Remittance of Funds: Commercial banks provide facility of transfer of funds from one
place to another through bank grafts, pay orders or mail transfers, on nominal
commission charges.
 Allied Services : In addition to above functions ,banks also provide allied services such
as bill payments, locker facilities, payment of insurance premium ,etc.
Type of Insurance
 Health Insurance: In this contact, insurer agrees to provide specified health
insurance at an agreed upon premium. It provides risk coverage unforeseen
health expenditure,
 Life Insurance: In this contract insurer agrees to pay a specified amount on
the death of the assured, or on the expiry of a certain fixed period, which
ever is earlier.
 Fire Insurance :Fire insurance is a contract whereby the insurer, In
consideration of the premium paid, undertakes to compensate the insured for
any loss that may result due to the occurrence of fire.
 Marine Insurance : Marine insurance is a contract of insurance under which
the insurer undertakes to indemnity the insured in the manner and to the
extent thereby agreed against marine losses.
 Communication: Communication is a process of exchange of ideas , views,
facts or feelings between two or more persons to reach common
understanding.
 Transportation: The functions of transportation is to more goods from the
places where their economic values is relatively low to places where it is
higher.
 Warehousing: Warehousing implies the holding or keeping of goods from the
time of their production or purchase until they are sold or consumed.