AMITY INTERNATIONAL SCHOOL, SEC-46, GURUGRAM

CHAPTER-4 (BUSINESS SERVICES)

Services are those economic activities that are intangible and imply an interaction to be realised
between the service provider and the customer.

NATURE OF BUSINESS SERVICES: (FIVE I’s OF SERVICES)

1. Intangibility: Cannot be seen, touched or smelled. Just can only be felt. Yet their benefits can be
availed of e.g., Treatment by a doctor.

2. Inconsistency: Different customers have different demands & expectations. e.g., Mobile
services/Beauty parlor.

3. Inseparability: Production and consumption are performed simultaneously e.g., ATM may replace
clerk, but presence of customer is a must.

4. Inventory Loss: Services cannot be stored for future use or performed earlier to be consumed later.
e.g., 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. A customer can get
the service modified according to specific requirement.
Type of Services:
1. Social Services: - Provided voluntarily to achieve certain goals e.g., health care and education
services provided by NGOs.

2. Personal Services: - Services which are experienced differently by different customers. e.g.,
tourism, restaurants etc.

3. Business Services: - Services used by business enterprises for the conduct of their activities. e.g.,
Banking, Insurance, communication, warehousing, and transportation.

BANKING

Meaning: - Bank is an institution that accepts deposits of money from public (for lending & investment),
repayable on demand and withdrawal by cheque or otherwise for the purpose of earning profits.
TYPES OF BANK ACCOUNTS‐
• SAVINGS ACCOUNT – It can be opened with a minimum initial amount by the savers. The objective
is to promote savings, no restriction on number and amount of deposit but some restrictions on the
withdrawals from this account. The interest rate is nominal.

• CURRENT ACCOUNT –This account is opened by businessmen to conduct their business transactions
smoothly. No restriction on the number and number of deposits as withdrawals. No interest in this
account.

• RECURRING DEPOSITS- This account is opened by those who want to save regularly for a certain
fixed period. A fixed amount is deposited every month for a specified period and the total amount is
repaid with interest.

• FIXED DEPOSITS – In this account the amount is once deposited for a fixed period say for 15 days to
10 years is repayable after the specified period. These deposits carry a high rate of interest.
• MULTIPLE OPTION DEPOSIT ACCOUNT – This interlinks the savings bank account and fixed deposit
account and any amount more than a predetermined amount is automatically transferred to a
fixed deposit.

BANKING SERVICES

1 BANK DRAFT – It 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.

2BANKER’S CHEQUE (PAY ORDER) – It refers to cheque issued by the bank in favour of the customer
which is payable within the town.

3)REAL TIME GROSS SETTLEMENT (RTGS): It is an online system for transferring funds in which transfer
of money takes place from one bank to another on a real time and on gross basis. The transaction is
settled as soon as it is processed. i.e., it is not subject to any waiting time. The minimum amount of
transaction is Rs. 2 lacs.

4)NATIONAL ELECTRONIC FUND TRANSFER (NEFT): It is an online system for transferring funds in which
transfer of money takes place from one bank to another on a net basis. The transaction is settled in
batches where there is no amount limit.

5)BANK OVERDRAFT– It is a facility in which a customer is allowed to overdraw his current account up
to an agreed limit.

6)CASH CREDIT – It is a facility to withdraw cash upto a sanctioned limit given to the borrower against
his current assets like shares, stock, bonds etc.

E-BANKING

Meaning: Banking using electronic media i.e., internet with personal computer / laptop / mobile phone

BENEFITS

TO CONSUMERS

• It facilitates 24-hour banking services to the customers.

• It inculcates a sense of financial discipline by recording each transaction.
• It provides greater security for the customers as they can avoid travelling with cash.
• It helps the customers to make some of the permitted transactions from house or Office or while.
travelling even through mobile telephone.
TO BANKS

• It provides competitive advantage to the bank.

• The load on branches is considerably reduced due to centralized database.
• It facilitates unlimited network to the bank.
WAYS OF E-BANKING

1. ELECTRONIC FUND TRANSFER (EFT): Under this system, a bank transfers wages and salaries directly
from the company’s account to the accounts of employees of the company.

2. AUTOMATIC TELLER MACHINE (ATM): It refers to an electronic terminal that allows people with
plastic cards to perform simple banking transactions, like withdrawal of cash 24x7 without any help of
human teller.

3. DEBIT CARD: It refers to a plastic card that allows the bank to take money from the customer’s
account and transfer it to a seller’s account.

4. CREDIT CARD: It refers to a plastic card that allows the customer to buy now and pay back the loan
amount to the bank at a future date.

5. ONLINE BANKING: Under this system, when the customer gives instruction on his computer
through internet, the bank computer transfers money from/ to customer’s account to biller’s account.

6. MOBILE BANKING: It is a system that allows customers to perform banking transactions through a
mobile device.

TYPES OF BANKS

COMMERCIAL BANKS
CO-OPERATIVE BANKS
SPECIALISED BANKS
FUNCTIONS OF COMMERCIAL BANKS

Accepts deposits.
Gives loans and advances.
Collects money against cheques deposited.
Remits money through bank drafts
Provides other services like accepting payments for utility bills, provides lockers, share trading.

INSURANCE

Meaning: - It is a contract where one party takes the responsibility for the risk of the other party in
exchange for some fixed fee.

Functions of insurance: • Providing certainty • Protection • Risk sharing • Assist in capital formation.

PRINCIPLES OF INSURANCE

1.UTMOST GOOD FAITH: A contract of insurance is a contract of uberrimae fidei i.e., a contract found
in the utmost good faith. Both the insurer and the insured display good faith towards each other
regarding the contract.

2.INSURABLE INTEREST: The insured must have interest in the subject matter of insurance. Insurable
interest means some pecuniary interest in the subject matter of the insurance contract.
3. PRINCIPLE OF INDEMNITY: It refers that the insured can get only the compensation against actual
loss, and he cannot make profit out of it.

4.PROXIMATE CAUSE: When the loss is the result of two or more causes, the proximate cause means
the direct, the most dominant and most effective cause of which the loss is a natural consequence, is
considered.

5. PRINCIPLE OF SUBROGATION: It refers to the fact that if the insurer compensate the insured then all
the rights related to the subject matter of insurance get transferred to the insurer.

6. PRINCIPLE OF CONTRIBUTION: - If the same subject matter, except life is insured by more than one
insurer, then the actual loss will be shared by all the insurers.

7.MITIGATION: This principles states that it is the duty of the insured to take reasonable steps to
minimise the loss or damage to the insured property.

TYPE OF INSURANCE

LIFE INSURANCE

Life insurance may be defined as a contract in which the insurer, in consideration of a certain premium,
either in a lump sum or by other periodical payments, agrees to pay to the assured, or to the person
for whose benefit the policy is taken, the assured sum of money, on the happening of a specified event
contingent on the human life or at the expiry of a certain period. The main elements of a life insurance
contract are:
• The life insurance contract must have all the essentials of a valid contract.
• The contract of life insurance is a contract of utmost good faith.
• In life insurance, the insured must have insurable interest in the life assured, at the time of taking the
policy.
• A life insurance contract is not a contract of indemnity.

FIRE INSURANCE

Fire insurance is a contract whereby the insurer, in consideration of the premium paid, undertakes to
make good any loss or damage caused by a fire during a specified period upto the amount specified in
the policy. The main elements of a fire insurance contract are:
• In fire insurance, the insured must have insurable interest both at the time of insurance and at the
time of loss.

• The contract of fire insurance is a contract of utmost good faith i.e uberrimae fidei.
• The contract of fire insurance is a contract of strict indemnity.
• The insurer is liable to compensate only when fire is the proximate cause of damage or loss.
MARINE INSURANCE
A marine insurance contract is an agreement whereby the insurer undertakes to indemnify the
insured in the manner and to the extent thereby agreed against marine losses. The main elements of a
marine insurance contract are:
• The contract of marine insurance is a contract of indemnity.
• The contract of marine insurance is a contract of utmost good faith.
• Insurable interest must exist at the time of loss.
• The principle of causa proxima will apply to it.

HEALTH INSURANCE
It provides protection against rising medical costs. It is a contract between the insurer and an individual
or a group in which the insurer, in consideration of premium, agrees to provide specified health
insurance.
POSTAL SERVICES

Postal services: Various postal services are • Mail Services • Other Services

MAIL SERVICES

i) UPC (Under Postal Certificate) –It is a certificate issued by the post office on payment of
prescribed fee when the sender wants to have proof that he has actually posted the letter.

ii)REGISTERED POST- It is a postal service in which mail is registered by the post office at the
time of sending, to assure safe delivery.

iii) SPEED POST – This service provides time–bound and express delivery of letters, documents,
and parcels across the nation and around the world.

• PARCEL – In this service articles are sent from one place to another through the post.

• COURIER- This service is provided by private operators in which they collect letters and
parcels from the doorstep of the sender and delivers them at the place of the addressee.

POSTAL SAVING SCHEMES

Recurring Deposit, National Savings Certificated (NSCs), Kisan Vikas Patra (KVP), Public
Provident Fund (PPF), Monthly Income Scheme (MIS).

TELECOM SERVICES: The various types of telecom services are of the following types:

• Cellular Mobile Services •Radio Paging Services • Fixed line services • Cable Services • VSAT
Services • DTH services.