Chapter 4 Business Services - BST class 11th

Meaning of business service:

Business services is a general term that describes all work that supports a business but does not produce a tangible commodity.

Difference between goods and services:

Purchasing of goods means purchasing an object or things. These goods are tangible and ownership is transferred to purchase. Tangible means, these goods has shape, size, colour. These goods can be touched, seen, felt.

Goods are also generally used to refer to commodities or items of all types.

Services

Services are all those economic activities that are intangible and involve an interaction to be experienced between the service provider and the user

For a layman, services are essentially intangibles. Their purchase does not result in the ownership of anything physical.

For example, you can only seek advice from the doctor, you cannot purchase him.

When you travel by plane then you buy service or buy plane,

Yar u don’t buy plane rather u buy travelling.

When you go to doctors then then u don’t doctor u buy his services When u hire lawyer u don’t buy lawyer rather you buy his services.

Services are those separately identifiable, essentially intangible activities that provides satisfaction of wants, and are not necessarily linked to the sale of a product or another service. A good is a physical product capable of being delivered to a purchaser and involves the transfer of ownership from seller to customer.

Nature of services

Following are nature of business Services-

1	Intangibility
2	Inconsistency
3	In Separability
4	Inventory Loss:
5	Involvement:

1	Intangibility	Services can not be seen, touched or smelled. Just can only be felt, yet their benefits can be availed of e.g. Treatment by doctor, Services by lawyers, Watching movie in cinema hall etc
2	Inconsistency	Different customers have different demands & expectation. Mobile services station /Beauty Parlour.
3	In Separability	Production and consumption are performed simultaneously. For e.g.. In ATM Services , withdrawal has to be physically present in front of ATM machines. Mohit and Singh sir class.
4	Inventory Loss:	Services cannot be stored for future use or performed earlier to be consumed at a later date. e.g. Un demanded time of Singh sir can not be stored , underutilized capacity of hotels and airlines during slack demand cannot be stored for future when there will be a peak demand.
5	Involvement:	Participation of the customer in the service delivery is a must e.g. in live face to face class teacher and students both should be physically present. A customer can get the service modified according to specific requirement

Types of services

When speaking of the service sector, services can be classified into three broad categories, viz., business services, personal services social services and

BPS

1	Business Services
2	Personal Services
3	Social Services

These

Business Services

Business services are those services which are used by business enterprises for the conduct of their activities. For example, banking, insurance, transportation, warehousing and communication services.

Personal Services

Services which are experienced differently by different customers. e.g. tourism, restaurants etc.

These services cannot be consistent in nature. They will differ depending upon the service provider. They will also depend upon customer’s preferences and demands. For example, tourism, recreational services, restaurants.

Social Services

Social services are those services that are generally provided Provided voluntarily to achieve certain goals e.g. healthcare and education services provided by NGOs.

These social goals may be to improve the standard of living for weaker sections of society, to provide educational services to their children, or to provide health care and hygienic conditions in slum areas. These services are usually provided voluntarily but for some consideration to cover their costs. For example, health care and education services provided by certain Non-government organisations (NGOs) and government agencies

In the context of better understanding of the business world, we will be limiting our further discussions to the first category of the service sector i.e., business services.

Meaning and Types of Business Services

Meaning:

Types of Business Services:

Explain :

1	Banking:
2	Insurance
3	Transportation:
4	Warehousing
5	Communication:

Details :

1	Banking:	Seth Girdhari lal and IDFC First Bank To buy – Land , Machine , Raw Material , Salary , Pay Electricity.bole toh both capex and Opex. May be in the form of Term Loan , Overdraft , Advances etc Business needs funds for acquiring assets, purchasing raw materials and meeting day- to-day expenses. Necessary funds (in the form of overdraft and cash credit facilities, loan and advances, etc.) can be obtained by businessmen from commercial banks. Thus, banking helps business activities overcome the problem of finance
2	Insurance	National insurance company and Girdhari lal Explain : Business involves various types of risks, e.g., theft, fire, accidents, etc. insurance makes provision against such risks. By getting their goods insured, producers can avoid the risk of loss of goods.
3	Transportation:	Seth Girdhari lal and Adani Logistics Company. Transport (road, rail or coastal shipping) facilitates movement of materials to the place of production, and the finished goods from factories to the place of consumption. Transportation makes for speed and efficiency in exchange. It is because of transportation that a producer can sell his goods in different parts of the world. It creates place utility.
4	Warehousing	Central Warehousing Corporation and seth girdhari lal Warehousing refers to the holding and preservation of goods until they are finally consumed. It helps business firms to overcome the problem of storage of goods and facilitates the availability of goods when needed. Warehousing creates time utility.
5	Communication:	Seth girdhari lal and Use of jio , Airtel , postal services , etc Communication services like postal services and telephone facilities are helpful to the business for: establishing links with the outside world, viz., suppliers, customers, competitors, etc. - for quick exchange of information. The electronic media is mainly responsible for this transformation.

Meaning of Bank

ICICI Bank

In simple terms, a bank accepts money on deposits, repayable on demand and also earns a margin of profit by lending money. A bank stimulates economic activity in the market by dealing in money. It mobilizes the savings of people and makes funds available to business financing their capital and revenue expenditure. It also deals in financial instruments and provides financial services for a price, i.e., interest, discount, commission, etc.

A banking company in India is the one which transacts the business of banking which means accepting, for the purpose of lending and investment of deposits of money from the public, repayable on demand or otherwise and withdrawable by cheques, draft, order or otherwise

Commercial banks are an important institution of the economy for providing institutional credit to its customers.

Type of Banks

The focus of banking is varied, the needs diverse and methods different. Thus, we need distinctive kinds of banks to cater to the above mentioned complexities.

Banks can be classified into the following:

1	Commercial banks	Public Sector Banks: SBI, PNB, IOB(Indian Overseas Bank) ,Bank of Baroda, Bank of India, Bank of Maharashtra Private sector banks HDFC Bank, ICICI Bank, Kotak Mahindra Bank and Jammu and Kashmir Bank
2	Cooperative banks	1.Saraswat Cooperative Bank. 2.Bharat Cooperative Bank. ... 3.Punjab & Maharashtra Co-operative Bank. 4.Janata Cooperative Bank.
3	Specialized banks	1,Industrial Development Bank of India: 2. Housing Finance Bank: 3. EXIM Bank: 4. Rural Credit Bank
4	Central bank	The Reserve Bank of India is the central bank of our country

Detail :

1	Commercial banks	Commercial banks are institutions dealing in money. These are governed by Indian Banking Regulation Act 1949 . According to it banking means accepting deposits of money from the public for the purpose of lending or investment. There are two types of commercial banks, public sector and private sector banks. Public sector banks are :SBI, PNB, IOB(Indian Overseas Bank) ,Bank of Baroda, Bank of India, Bank of Maharashtra,etc., Public sectors banks are those in which the government has a major stake and they usually need to emphasise on social objectives than on profitability. Private sector banks are owned, managed and controlled by private promoters and they are free to operate as per market forces. Private sector banks represented by HDFC Bank, ICICI Bank, Kotak Mahindra Bank and Jammu and Kashmir Bank
2	Cooperative banks	Cooperative Banks are governed by the provisions of State Cooperative Societies Act and meant essentially for providing cheap credit to their members. It is an important source of rural credit, i.e., agricultural financing in India
3	Specialized banks	Specialized banks are foreign exchange banks, industrial banks, development banks, export-import banks catering to specific needs of these unique activities. These banks provide financial aid to industries, heavy turnkey projects and foreign trade
4	Central bank	The Central bank of any country supervises, controls and regulates the activities of all the commercial banks of that country. It also acts as a government banker. It controls and coordinates currency and credit policies of any country. The Reserve Bank of India is the central bank of our country

Function of Commercial Banks

Primary Functions - Accepting Deposits

Accepting deposits is the main function of commercial banks. Banks offer different types of Bank accounts to suit the requirements and needs of different customers. Different types of Bank accounts areas follows

1	Fixed Deposit Account	Money is deposited in the account for a fixed period is called as Fixed Deposit account. After expiry of specified period, person can claim his money from the bank. Usually the rate of interest is maximum in this account. The longer the period of deposit, the higher will be the rate of interest on deposit.
2	Current Deposit Account	Current deposit Accounts are opened by businessman. The account holder can deposit and Withdraw money. Whenever desired. As the deposit is repayable on demand, it is also known as demand deposit. Withdrawals are always made by cheque. No interest is paid on current accounts. Rather charges are taken by bank for services rendered by it.
3	Saving Deposit Account	The aim of a saving account is to mobilize savings of the public. A person can open this account by depositing a small sum of money. He can withdraw money from his account and make additional deposits at will. Account holder also gets interest on his deposit. In this account though the rate of interest is lower than the rate of interest on fixed deposit account.
4	Recurring Deposit Account	The aim of recurring deposit is to encourage regular savings by the people. A depositor can deposit a fixed amount, say Rs. 100 every month for a fixed period. The amount together with interest is repaid on maturity. The interest rate on this account is higher than that on saving deposits.
5	Multiple Option Deposit Account	It is a type of saving Bank A/c in which deposit in excess of a particular limit get automatically transferred into fixed Deposit. On the other hand, in case adequate fund is not available in our saving Bank Account so, as to honour a cheque that we have issued the required amount gets automatically transferred from fixed deposit to the saving bank account. Therefore, the account holder has twin benefits from this amount (i) he can earn more interest and (ii) It lowers the risk of dishonoring a cheque.

Primary function : Lending Money

Lending Money with the help of money collected through various types of deposits, commercial banks lend finance to businessman, farmers, and others. The main ways of lending money are as follows:

1	Term Loans	These loans are provided by the banks to their customers for a fixed period to purchases Machinery. Truck. Scooter. House etc. The borrowers repay the loans in Monthly/Quarterly/Half Yearly/Annual installments.
2	Bank Overdraft	The customer who maintains a current account with the bank, takes permission from the bank to withdraw more money than deposited in his account. The extra amount withdrawn is called overdraft. This facility is available to trustworthy customers for a small period. This facility is usually given against the security of some assets or on the personal security of the customer. Interest is charged on the actual amount overdrawn by the customer.
3	Cash Credit	Under this arrangement, the bank advances cash loan up to a specified limit against current assets and other securities. The bank opens an account in the name of the borrower and allows him to withdraw the borrowed money from time to time subject to the sanctioned limit. Interest is charged on the amount actually withdraw
4	Discounting of Bill of Exchange	Under this, a bank gives money to its customers on the security of a bill of exchange before the expiry of the bill in ease of customers needs it. For this service bank charges discount for the remaining period of the bill.

Secondary function of banks – Agent function

The secondary functions of commercial banks are as under:

Agent Functions

As an agent of its customers a commercial bank provides the following services:

1	Bills of exchange	Collecting bills of exchange, promissory notes and cheques.
2	Collecting	Collecting dividends, interest etc.
3	Buying	Buying and selling shares, debentures and other securities
4	Payment	Payment of interest, insurance premium etc
5	Transferring funds	Transferring funds from one branch to another and from one place to another
6	Acting as an agent	Acting as an agent of representative while dealing with other banks and financial institutions. A Commercial banks performs the above functions on behalf of and as per the instructions of its customers

Secondary function : General Utility Functions:

Commercial banks also perform the following miscellaneous functions:

1	lockers	Providing lockers for safe custody of jewellery and other valuables of customers
2	references	Giving references about the financial position of customers
3	information to a customer	Providing information to a customer about the credit worthiness of other customers
4	trade information	Supplying various types of trade information useful to customer.
5	letter of credit	Issuing letter of credit, pay orders, bank draft, credit cards and travelers cheques to customers
6	Underwriting	Underwriting issues of shares and debentures.
7	foreign exchange	Providing foreign exchange to importers and travelers going abroad
8	Bank Draft	It is a financial instrument with the help of which money can be remitted from one place to another. Anyone can obtain a bank draft after depositing the amount in the bank. The bank issues a draft for the amount in its own branch at other places or other banks (only in case of tie up with those banks) on those places. The payee can present the draft on the drawee bank at his place and collect the money. Bank charges some commission for issuing a bank draft
9	Banker’s cheque or Pay Order	It is almost like a bank draft. It refers to that bank draft which is payable within the town. In other words banks issue pay order for local purpose and issue bank draft for outstation transactions

Meaning of E-BANKING or ELECTRONIC BANKING SERVICES

Use of computers and internet in the functioning of the banks is called electronic banking. Because of these services the customers don’t need to go to the bank every time for every transaction. He can make transactions with the bank at any time and from any place. The chief electronic services are the following:

1	Electronic. Fund Transfer	Under it, a bank transfers wages and salaries directly from the company s account to the accounts of employees of the company. The other examples of EFTs are online payment of electricity bill, water bill, insurance premium, house tax etc
2	Automatic Teller Machines	(ATMs) ATM is an automatic machine with the help of which money can be withdrawn or deposited by inserting the card and entering personal Identity Number (PIN). This machine operates for all the 24 hours
3	Debit Card	A Debit Card is issued to customers in lieu of his money deposited in the bank. The customers can make immediate payment of goods purchased or services obtained on the basis of his debit card provided the terminal facility is available with the seller.
4	Credit Card:	A bank issues a credit card to those of its customers who enjoy good reputation. This is a sort of overdraft facility. With the help of this card, the holder can buy goods or obtain services up to a certain amount even without having sufficient deposit in their bank accounts.
5	Telebanking	Under this facility, a customer can get information about the account balance or any other information about the latest transactions on the telephone.
6	Core Banking Solution Centralized Banking Solution	:n this system customer by opening a bank account in one branch (which has CBS facility) can operate the same account in all CBS branches of the same bank anywhere across the country. It is immaterial with which branch of the bank the customer deals with when he/she is a CBS branch customer.
7	National Electronic Fund Transfer	NEFT refers to a nationwide system that facilitate individuals, firms and companies to electronically transfer funds from any branch to any individual, firm or company having an account with any other bank branch in the country. Details in next class
8	Real Time Gross Settlement	RTGS refers to a funds transfer system where transfer of funds takes place from one bank to another on a Real-time and on Gross basis. Settlement in Real-time means transactions are settled as soon as they are processed and are not subject to any waiting period. Detail in next class
9	Immediate Mobile Payment Service (IMPS)	Immediate Mobile Payment Services(IMPS) is a real-time instant inter-bank funds transfer system managed by National payment corporation of India Detail in next class

Comparative differentiation NEFT, RTGS, IMPS.

Following are difference between NEFT, RTGS, and IMPS.

Base	National Electronic Funds Transfer (NEFT)	Real-Time Gross Settlement (RTGS)	Immediate Mobile Payment Service (IMPS)
Settlement Type	Half hourly batches	Real-time	Real-time
Minimum Transfer Limit	Re.1	Rs.2 lakh	Re.1
Maximum Transfer Limit	No Limit However, the maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances within India and Nepal under the Indo-Nepal Remittance Facility Scheme.	No limit	Rs.2 lakh
Service Timings	Available 365 days 24×7	vailable 365 days 24×7	Available 365 days 24/7
In ward Transaction Charges	No charges	No charges for inward but Charges applicable for outward transactions for amount: Rs.2 lakh – Rs.5 lakh: not exceeding Rs.25 Above Rs.5 lakh: not exceeding Rs.50 GST is also applicable	Decided by the individual member banks and ppis
Payment Options	Online and Offline	Online and Offline	Online

Benefits of E BANKING

Benefits of E-Banking to Customer:

1	24x7 Services	E-Banking provides 24 hours a day X 365 days a year services to the customers
2	Any time Any Where	Customers can make transactions from office or house or while traveling via mobile telephone
3	Customers satisfaction	There is greater customer satisfactions through E-banking as it offers unlimited access and great security as they can avoid travelling with cash

Benefits of E-Banking to Banks:

1	Low transaction cost	E-Banking lowers the transaction cost.
2	No Load on branch	Load on branches can be reduced by establishing centralized database
3	competitive advantage	E-Banking provides competitive advantage to the bank, adds value to the banking relationship.

Meaning of Insurance

ANY THING CAN HAPPEN ANY TIME : MET LIFE ADS

Life is full of uncertainties. The chances of occurrence of an event causing losses are quite uncertain. There are risks of death and disability for human life; fire and burglary risk for property; perils of the sea for shipment of goods and, so on.

If any of these takes place, the individuals and/or, organisations may suffer a great loss, sometimes beyond their capacities to bear the same. It is to minimise the impact of such uncertainties that there is a need for insurance.

Investment in factory buildings or heavy equipments or other assets is not possible unless there is arrangement for covering the risks, with the help of insurance. Keeping this in mind, people facing common risks come together and make small contributions to a common fund, which helps to spread the loss caused to an individual by a particular risk over a number of persons who are exposed to it.

So in insurance the agreement or contract is put in writing and is known as ‘policy’. The person whose risk is insured is called ‘insured’ and the firm which insures the risk of loss is known as insurer/assurance underwriter.

So Insurance is a contract under which one party (Insurer or Insurance Company) agrees in return of a consideration (Insurance premium) to pay an agreed sum of money to another party (Insured) to make good for a loss, damage or injury to something of value in which the insured has financial interest as a result of some uncertain event

Fundamental principle of Insurance

Principles of Insurance are:

U & I PCS Mitigate

1	Utmost Good Faith	अच्छी भावना
2	Insurable Interest	बीमा योग्य Things
3	Indemnity	हानि से सुरक्षा
4	Proximate Cause	संसक्त कारण
6	Contribution:	योगदान
5	Subrogation:	प्रस्थापन of right or transfer of onwership
7	Mitigation	शमन

Detail :

1	Utmost Good Faith	Insurance contracts are based upon mutual trust and confidence between the insurer and the insured. It is a condition of every insurance contract that both the parties i.e.insurer and the insured must disclose every material fact and information related to insurance contract to each other.
2	Insurable Interest	It means some pecuniary interest in the subject matter of insurance contract. The insured must have insurable interest in the subject matter of insurance i.e., life or property insured the insured will have to incur loss due to this damage and insured will be benefitted if full security is being provided. A businessman has insurable interest in his house, stock, his own life and that of his wife, children etc.
3	Indemnity	Principle of indemnity applies to all contracts except the contract of life insurance because estimation regarding loss of life cannot be made. The objective of contract of insurance is to compensate to the insured for the actual loss he has incurred. These contracts ‘provide security from loss and no profit can be made out of these contracts.
4	Proximate Cause	The insurance company will compensate for the loss incurred by the insured due to reasons mentioned in insurance policy. But if losses are incurred due to reasons not mentioned in insurance policy than principle of proximate cause or the nearest cause is followed.
5	Contribution:	According to this principle if a person has taken more than one insurance policy for the same risk then all the insurers will contribute the amount of loss in proportion to the amount assured by each of them and compensate for the actual amount of loss because he has no right to recover more than the full amount of his actual loss.
6	Subrogation: Transfer of left over property after compensation	This principle applies to all insurance contracts which are contracts of indemnity. As per this principle, when any insurance company compensates the insured for loss of any of his property, then all rights related to that property automatically gets transferred to insurance company.
7	Mitigation- Steps to minimize loss	According to this principle the insured must take reasonable steps to minimize the loss or damage to the insured property otherwise the claim from the insurance company may be lost.

Types of Insurance

Various types of insurance exist by virtue of practice of insurance companies and the influence of legal enactments controlling the insurance business. Broadly speaking, insurance may be classified as follows:

Under life insurance the amount of Insurance is paid on the maturity of policy or the death of policy holder whichever is earlier. If the policy holder survives till maturity he enjoys the amount of insurance. If he dies before maturity then the insurance claim helps in maintenance of his family. The insurance company insures the life of a person in exchange for a premium which may be paid in one lump sum or periodically say yearly, half yearly quarterly or monthly.

A life insurance policy was introduced as a protection against the uncertainity of life. But gradually its scope has widened and there are various types of insurance policies available to suit the requirements of an individual. For example, disability insurance, health/medical insurance, annuity insurance and life insurance proper

This insurance provides protection to the family at the premature death or gives adequate amount at old age when earning capacities are reduced. The insurance is not only a protection but is a sort of investment because a certain sum is returnable to the insured at the time of death or at the expiry of a certain period.

Life insurance also encourages savings as the amount of premium has to be paid regularly. It thus, provides a sense of security to the insured and his dependents.

The general principles of insurance discussed in the previous section apply to life insurance also with a few exceptions

The main elements or principles of a life insurance contract are:

U & I Essential of valid contract

1	Utmost good faith.
2	Insurable interest
3	Not a contract of indemnity
4	Essentials of a valid contract.

Detailed

1	Utmost good faith.	The contract of life insurance is a contract of utmost good faith. The assured should be honest and truthful in giving information to the insurance company. He must disclose all material facts about his health to the insurer. It is his duty to disclose accurately all material facts known to him even if the insurer does not ask him;
2	Insurable interest	In life insurance, the insured must have insurable interest in the life assured. Without insurable interest the contract of insurance is void. In case of life insurance, insurable interest must be present at the time when the insurance is affected. It is not necessary that the assured should have insurable interest at the time of maturity also. For example, a person is presumed to have an interest in his own life and every part of it, a creditor has an insurable interest in the life of his debtor, and a proprietor of a drama company has an insurable interest in the lives of the actors;
3	Not a contract of indemnity	Life insurance contract is not a contract of indemnity. The life of a human being cannot be compensated and only a specified sum of money is paid. That is why the amount payable in life insurance on the happening of the event is fixed in advance. The sum of money payable is fixed, at the time of entering into the contract. A contract of life insurance, therefore, is not a contract of indemnity
4	Essentials of a valid contract.	The life insurance contract must have all the essentials of a valid contract. Certain elements like offer and acceptance, free consent, capacity to enter into a contract, lawful consideration and lawful object must be present for the contract to be valid;

Types of Life Insurance Policies:

1	Whole Life Policy	संपूर्ण जीवन नीति, Payble after death to kegal heirs.
2	Endowment Life Insurance Policy	चंदा, दान ,धर्मस्व ,धर्मादा, वृत्ति,,वृत्तिदान, दहेज देना, पुण्यार्थ या धर्मार्थ दान. अक्षयनिधि बंदोबस्ती
3	Joint Life Policy	संयुक्त जीवन नीति
4	Annuity Policy	वार्षिकी नीति
5	Children’s Endowment Policy	बच्चों की बंदोबस्ती नीति

Detail:

1	Whole Life Policy	Under this policy the sum insured is not payable earlier than death of the insured. The sum becomes payable to the heir of the deceased.
2	Endowment Life Insurance Policy	Under this policy the insures undertakes to pay the assured to his heirs or nominees a specified summon the attainment of a particular age or on his death whichever is earlier.
3	Joint Life Policy	It involves the insurance of two or more lives simultaneously. The policy money is payable on the death of any one olives assured and the assured sum will be payable to the survivor or survivors.
4	Annuity Policy	This policy is one under which amount is payable in monthly, quarterly, half yearly or annual installments after the assured attains a certain age. This is useful to those who prefer a regular income after a certain age.
5	Children’s Endowment Policy	This policy is taken for the purpose of education of children or to meet marriage expenses. The insurer agrees to pay a assured sum when the child attains a certain age.

Fire Insurance

It provides safety against loss from fire. If property of insured gets damaged due to property as compensation from insurance company. If no such event happens, then no claim shall be given.

Fire insurance is a contract whereby the insurer, in consideration of the premium paid, undertakes to make good any loss or damage caused by fire during a specified period upto the amount specified in the policy.. A claim for loss by fire must satisfy the two following conditions:

Actual loss

There must be actual loss; and

Accidental and nonintentional

Fire must be accidental and nonintentional

The risk covered by a fire insurance contract is the loss resulting from fire or some other cause, and which is the proximate cause of the loss. If overheating without ignition causes damage, it will not be regarded as a fire loss within the meaning of fire insurance and the loss will not be recoverable from the insurer.

A fire insurance contract is based on certain fundamental principles which have been discussed in general principles.

The main elements or features of a fire insurance contract are:

Features

U & I Yearly Payar

Utmost Good Faith

The contract of fire insurance is a contract of utmost good faith. The insured should be truthful and honest in giving information to the insurance company regarding the subject matter of the in

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