Services, Banking, Insurance

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 Services

• “Any act or performance that one party can offer to another that is essentially
intangible and does not result in the ownership of anything. Its production may not
be tied to a physical product”. ____ Philip Kotler
• “Services are deeds, processes and performances provided or co-produced by one
entity or person for another entity or person”. ____Valerie Zeithamal
• “Service is an activity or an advantage which can be given by a party to another
party which is mostly intangible and cannot affect ownership, and its production or
is not related to any tangible product.” ____ Murti Sumarni
• “Services are activities, benefits or satisfactions which are offered for sale or
provided in connection with the sale of goods.”____ American Marketing
Association
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 Features
• Intangibility
• Inconsistency
• Inseparable
• Inventory Less
• Involvement

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Points Goods Services
Meaning Goods refer to the tangible consumable products, articles, commodities Services are the intangible economic products, amenities,
that are offered by the companies to the customers in exchange for money. facilities, benefits or help that are provided by a person to
another person on demand.

Nature Goods are tangible in nature. Services are intangible in nature.

Separable Goods can be separated from the seller. Services cannot be separated from the service provider.

Storage/Inventory Goods can be stored for use in future or multiple uses. Services cannot be stores for future use.

Production and There is a time lag between production and consumption of goods. Production and consumption of services occurs simultaneously.
Consumption

Evaluation The evaluation of goods is very simple and easy. The evaluation of services is complicated.

Involvement Goods cannot require involvement of customers. The quality of goods not Services can be required involvement of customers. The quality of
affect by customer involvement. service affect by customer involvement.

Consistency in Quality Goods are consistent in quality. They are homogeneous in nature. Services are inconsistent in quality. They are heterogeneous in
nature.
Return Goods can be returned to sellers. Services cannot be returned back once they are provided.

Transfer of Ownership The ownership of goods can be transferred from seller to buyer. The ownership of services cannot be transferred from seller to
buyer.
Example Books, Pen, bottles, mobile, etc. Banking, insurance, transport, communication, warehousing, etc.

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 Types of Services
• Personal Services: for individual person
• Public Services: for general public
• Business Services: for business

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 Business Services
• Used by business enterprises for Services Difficulty
the conduct of their activities.
Banking Finance
• Solve the difficulty of industry and
trade Insurance Risk
• Aids to Trade or Tertiary Industry
Transport Place

Communication Information

Warehousing Time

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 Banking
• German Language ‘Banck’ meaning a
mound or heap (quantity).
• Italians adopted ‘Banco’ which a
bench at which the money changers
used to change one kind money into
another and transact their banking
business.
• The Bank of Venice – 1157; The Bank
of Barcelona – 1401 and The Bank of
Genoa – 1407.
• Bank of Hindustan – 1770
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 Bank – Definitions
• "A bank is a reliable financial institution which receives the money from one group of people and lends
to other group of people. So bank performs the duty of financial intermediary among the people and
creates the credit money".
• “A bank is an establishment which makes to individuals such advances of money as may be required and
safely made, and to which individual entrust money when not required by them for use.” ____Prof.
Kinely
• “Bank is an establishment for custody of money, which it pays out on customer’s order.” ___Oxford
Dictionary
• “Banking Company is one which transacts the business of banking which means the accepting for the
purpose of lending or investment of deposits of money from the public, repayable on demand or
otherwise and withrdrawable by cheque, draft, order or otherwise.” ____ Section 5(c) of the Banking
Regulation Act, 1949
• “A bank is an institution which deals in money and credit.” ___ Cairns Cross

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 Types of Banks
• Central Bank: Apex financial institution,
regulator and controller of banking sector,
RBI Act,1934 ‘Reserve Bank Of India’ started
in 1935 and nationalized in 1949.
• Commercial Bank: profit seeking business
firm dealing in money and credit, Public
Sector, Private Sector, Foreign Banks

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 Types of Banks
• Cooperative Bank: on a “no profit, no loss”
basis. registered under the Cooperative
Societies Act, 1912 Urban, Rural, Primary
Credit Societies, District Central
Cooperative Bank, State cooperative Bank
• Industrial Development Bank: provide
medium and long term finance to industrial
development, IFCI (1948), IDBI, SIDBI, ICICI,
IRTC, IRBI, SFC .

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 Types of Banks
• Exchange Bank: exchange money from
one currency to another currency,
finance to foreign trade transactions
• Regional Rural Bank: operation with the
objective of providing credit to the rural
and agricultural regions. Central Govt. –
50%, State Govt.– 15% and Sponsored
Bank – 35%.

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 Types of Banks
• Savings Bank: to encourage savings
habit among the people.
• Investment Bank: financial and
advisory assistance to their customers,
An investment bank may help in
merger and acquisition (M&A)
transactions, issue securities, or
provide financing for large-scale
business projects. Acts as an
intermediary between buyers and
sellers of stock and bond, that help
clients in raising capital.
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 Specialized Banks
• EXIM: The bank offers services, such as
finance for export of projects, capital
equipment finance, export project cash-flow
deficit finance, and guarantees.
• SIDBI: finance to small business
• NABARD:

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 New Models of Banking – Small Finance Bank

• It providing basic banking activities such

as underserved and unserved sections.
small business units, small and marginal
farmers, micro and small industries and
unorganized sector entities.

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 New Models of Banking – Payment Bank
• Payment Banks is a new model of banks in India
conceptualized by RBI. These banks function
differently than conventional banks in terms of
features and services. People and small
businesses who are underserved can visit such
banks and open savings accounts and current
accounts in these banks.
• A payments bank is like any other bank, but
operating on a smaller scale without involving
any credit risk.
• Payment banks of India cannot issue loans and
credit cards. However, they can issue ATM/Debit
cards. They can also provide online banking and
mobile banking facilities.
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 Functions of
Commercial Banks

Primary Secondary

Granting
Accepting Agency
Loans and Utility
Deposits Function
Advances

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 Accepting Deposits – Time Deposits
• Fixed Deposit: Deposits a certain sum of money
for a fixed period, which is not withdrawable
before the maturity date. Higher interest rate,
Fixed Deposit Receipt
• Recurring Deposit: Customers deposit certain
sum of money on monthly installments for a
period ranging from 12 months to 120 months
on a uniform pattern. The entire amount along
with interest is payable after the payment of last
installment. This type of deposits is much useful
to the middle and low-income group of the
people. It works on the principle of “little drops
of water make a big ocean”.
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 Accepting Deposits – Demand Deposits
• Saving Account: Those people who wants to save for future needs
and uncertainties. Encourage habit of savings. salaried, middle
and low-income group. Low rate of interest
• Current Account: opened by business people, no restrictions on
the number of deposits & withdrawals, no interest, overdraft
facility
• Flexi Deposit: combination of time and demand deposits

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 Granting Loans and Advances
Loans
• When a fund is borrowed by an entity or
business corporation or an individual
from another entity, repayable after a
specific period carrying interest rate is
known as loans
• Short Term: up to 1 year
• Medium Term: 1 year to 5 years
• Long term: More than 5 years
Advances
• When a fund is provided by the bank to a
business corporation or an entity for a
specific purpose to be repayable after a
short duration is known as advances.
• Cash Credit
• Overdraft
• Discounting of Bills of Exchange
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 Agency Functions
• Periodic Collections and Payments: salary, interests, commissions,
dividends, taxes, bills, premiums, rent etc.
• Portfolio Management: purchase and sell securities, advise
regarding investment
• Fund Transfer: one branch to another branch, one bank to another
bank
• Dematerialization: holding electronic securities
• Forex Transaction: currency exchange
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 Utility functions
• Issue of Drafts and Cheques
• Locker Facility
• Project Reports
• Gift Cheques
• Letter of Credit
• Underwriting Services
• Gold related Services

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 E-Banking Services
• E-banking refers to a banking arrangement, with which the customer can perform various transactions
over the internet, which is end-to-end encrypted, i.e. it is completely safe and secure.
• Personal or commercial banking transactions with the help of electronic and telecommunication
network.
• Virtual or online banking.
• 24 hours service
1. ATM
2. Credit cards
3. Debit Cards
4. NEFT
5. RTGS
6. IMPS
7. Net Banking
8. Mobile Banking

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 ATM
• Automated Teller Machine.
• The ATM’s are electronic machines
which are operated by the customer
himself withdraw or deposit cash
from the bank account.
• Services: withdraw money, deposit
money, mini statement, money
transfer, recharge mobile, pay the
telephone bills, check the balance
etc.
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 Credit Card
• A credit card is a payment card issued to
users (cardholders) to enable the
cardholder to pay a merchant for goods
and services, based on the cardholder's
promise to the card issuer to pay them
for the amounts so paid plus other
agreed charges.
• Short term loan to customer and he pay
money to bank after specific days
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 Debit Card
• When card holder uses this card for
purchasing goods and services that time
banks give the debit to card holder A/c.
• It means deduct amount from the
account.
• For the debit card the customer requires
saving or current account in bank.

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NEFT, RTGS, IMPS

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Basis of Comparison NEFT RTGS IMPS

Minimum Transfer Value Re.1 Rs.2 lakh Re.1

Payment Options Online & Offline Online & Offline Online

Maximum Transfer Value No Limit No Limit Rs.2 lakh

2 hours (subject to cut-off

Fund Transfer Speed Immediate Immediate
timings and batches)

Settlement Type Half Hourly Basis Real Time Real Time

8 am-7pm working days
(except 2nd & 4th
8 am-6pm (for working
Service Timings Saturday) in bank. Available 365 Days:24/7
days)
Available 365 days by
internet or mobile
Inward Transaction Decided by Individual
No Charges No Charges
Charges Member Bank PPls
Managed BY RBI RBI NPCI 27
Net Banking & Mobile Banking

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 Insurance
• We live in a risky world.
• Risk is the potential of loss (an undesirable
outcome, however not necessarily so)
resulting from a given action, activity
and/or inaction.
• Act of guarding against risk.
• insurance or an insurance policy is a
promise that guarantees financial
assistance in challenging situations and is
governed by terms and conditions and is
offered by the insurer to a policyholder, in
exchange for a premium.

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 Definitions
• “Insurance is a social device for eliminating or reducing the cost to society of certain
types of risk.”________ Mowbray and Blan Chard
• “Insurance is a form of contract or agreement under which one party agrees in
return for a consideration to pay an agreed amount of money to another party to
make good for a loss, damage, or injury to something of value in which the insured
has a pecuniary interest as a result of some uncertain events.”___________
Dictionary of Business and Finance
• “A contract between two parties whereby the insurer agrees to pay to the insured a
certain sum of money on the happening of certain events or agrees to indemnify
the insured or assured from losses arising from certain specified events.”
• “A provision which a prudent man makes against inevitable contingencies.”
__________ Insurance Act 1938

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 Basic Terms
• Insured: The person to whom a compensation
is to be paid, in case of loss is called the
insured or assured. He is a risk bearer, take
insurance for his property. Policy holder
• Insurer: The Company that agrees to pay
compensation on the happening of a specific
event against the payment of regular
premium is called insurer. In the insurance • Subject Matter of Insurance: It refers to the
contract insurer give promise to provide subject against which the policy is taken. The
financial support if insured person bears the purpose of insurance.
loss. • Life Insurance: Human life
• Premium: Fixed amount to be paid to the • Fire Insurance: The goods, assets and
insurer by insured. This premium may be paid property
monthly, quarterly, half-yearly or annually.
• Marine Insurance: Ship, Cargo and freight
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 Basic Terms
• Policy: It is formal written document
which consists of terms and conditions of
contract of insurance. It is statement of
contract between the insurer and
insured.
• Claim: It is the demand made by the
insured to the insurer to compensate for
loss on happening of the event.
• Proposal: It is a written request by the
insured to the insurance company to
issue an insurance policy. It is also known
as insurance application form.
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 Basic Terms
• Reinsurance: It is a system by which original
insurer enters into a contract with other
insurer for sharing part or all the risk
undertaken by him. It means insurance
company take insurance from another
insurance company. The main objective is to
reduce the risk of large contracts.
• Double Insurance: when one insured person
takes insurance policy from two or more
insurance companies for same subject
matter of insurance, it is known as Double
Insurance. In case of life insurance all
insurance companies liable to pay the policy
amount to insured person. In case of general
insurance all insurance companies
compensate the loss in proportionate.
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Principle of Utmost Good Faith

Principle of Insurable Interest

Principle of Indemnity

Principle of Subrogation

Principle of Contribution

Principle of Mitigation of Loss

Principle of Causa-Proxima
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 1. Principles of Utmost Good Faith
• Faith means Trust, Confidence, belief.
• The insurance contracts totally based on faith.
• The insurer and insured must disclose all material facts clearly,
completely and correctly.
• The insured must provide complete, correct and clear
information of subject matter.
• The insurer must provide complete, correct and clear
information regarding terms and conditions of the contract.
• This principle is applicable to all contracts of insurance i.e. life,
fire and marine insurance.
• Failure to make disclosure of the material facts by both parties
will make the contract voidable.

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 2. Principles of Insurable Interest
• Insurable Interest means some financial interest
in the subject matter.
• The subject matter of the insurance is the
correlation between the insured and insurable
interest.
• The insured person must suffer some financial
loss by the damage of the insured object.
• In life insurance it refers to the life insured.
• In fire and marine insurance it must be present at
the time of taking policy and also at the time of
the occurrence of loss.
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 3. Principles of Indemnity
• Indemnity means security, protection and
compensation given against damage, loss
or injury.
• Under this the insurer agreed to
compensate the insured for the actual loss
suffered.
• It is applicable to fire, marine and other
general insurance.

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 4. Principles of Subrogation
• As per this principle after the insured is
compensated for the loss due to damage
to property insured, then the right of
ownership of such property passes to the
insurer.
• It is applicable to all contracts of
indemnity.

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 5. Principles of Contribution
• It is applicable to all contracts of indemnity.
• Policy holder takes the insurance from two or
more insurance companies on same risk or New India
subject matter. Insurance Company

Mr. A
• Under this principle the insured can claim
Oriental Insurance
the compensation only to the extent of
actual loss either from any one insurer or all
National Insurance
the insurers. Company

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 6. Principles of Mitigation of Loss
• Under this principle it is the duty of
the insured to take all possible
steps to minimize the loss to the
insured property on the happening
of uncertain event.

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 7. Principle of Causa-Proxima
• Causa Proxima is the Latin phrase. It means Proximate Cause i.e.
nearest cause.
• When a loss is caused by more than one causes, the proximate or
the nearest or the closest cause should be taken into
consideration to decide the liability of the insurer.

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 Life Insurance
 Insurance provides protection against the risk of loss.
 In human life many risk are there such as old age,
sickness, accident, death etc. so require human
protection against these losses.
 The life insurance provides protection to human life.
 “A contract whereby an insurance company
undertakes in consideration of regular payment of
premium to pay a certain sum of money to the
assured on maturity of policy or death, whichever is
earlier”
 “Life insurance contract may be defined whereby the
insurer, in consideration of a premium paid either in
lump sum or in periodical installments , undertakes
to pay an annuity or a certain sum of money either
on death of the insured or on the expiry of certain
number of years.”
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 Types of Life Insurance Policies
1. Whole Life Policy: Lifetime Coverage
2. Endowment Insurance Policy: Insurance +
savings (low risk-return factor)
3. Term Insurance Policy: Pure risk cover for a
limited period of time.
4. Annuity Policy: repayment in installments
5. Money-Back Policy: Insurance cover with
periodic returns as survival benefit.
6. Child Insurance: Insurance cover for expenses
related to the child’s educational, matrimonial,
etc.
7. Retirement Plans: Financial benefit for the
post-retirement period.
8. ULIP Policy: Insurance + investment (high risk-
return factor). Share market benefits
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 Fire Insurance
• “A contract in which insurer promises to bay
compensation to insured if something happens
due to subject matter, due to fire or related
events”.
• “In addition to other, fire insurance is that
contract which takes place against fire and such
other risks which are mentioned in Fire
Insurance contract”. ______Indian insurance
Act, 1938

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 Types of Fire Insurance Policies
1. Valued Policy: Goods are insured for an agreed value between insurer and insured.
2. Average Policy: Average clause
3. Specific Policy: definite sum
4. Floating Policy: For goods laying at different locations.
5. Excess Policy: Taken when the value of goods or stock fluctuates.
6. Reinstatement Policy: replace the property or goods lost by fire instead of
compensation.
7. Comprehensive Policy: many risks under one policy.
8. Consequential Loss Policy: tangible & intangible properties
9. Sprinkler Leakage Policy: covers damage caused to property by an automatic
sprinkler system that has leaked.

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 Marine Insurance
• “An agreement whereby the insurer
undertakes to indemnity the assured, in
the manner and to the extent thereby
agreed against losses incidental marine
adventure. It may cover loss or damage to
vessels, cargo or freight.” _______Marine
Insurance Act, 1963
• “Marine insurance is contract under
which the insurer undertakes to
indemnify the insured against the losses
incidental to marine adventure.”
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 Types of Marine Insurance Policies
1. Voyage Policy: Subject matter is insured for a specific voyage (journey)
irrespective of time.
2. Time Policy: Subject matter is insured for specific period of time.
3. Mixed Policy: Combination of voyage and time policy.
4. Valued policy: Goods are insured for an agreed value between insurer and
insured person, decide compensation claim while taking policy
5. Blanket Policy: It covers multiple risks in one property or many properties under
one policy.
6. Port Risk Policy: Covers all types of risk of a vessel while it is halted at a port for
a particular time.
7. Composite Policy: Policy purchased from more than one insurers.
8. Single Vessel Policy: Suitable for small ship owner having only one ship.
9. Fleet Policy and Block Policy: In fleet policy several ships belonging to one owner
are insured under same policy. And under block policy cargo owner is protected
in all modes of transport.
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 Other Insurance
Health Insurance: provides a pure risk
cover where the sum assured becomes
payable upon the life assured being
diagnosed of certain identified illness
during the term of the policy.,
individual, family, critical illness
Automobile Insurance: Comprehensive,
Third Party

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 Other Insurance
Crop Insurance: for crops
Travel Insurance: for travelling.
International, Domestic, Student
Home Insurance: Theft, Earthquake
Cattle Insurance: for livestock

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