Business Services

Meaning

The service sector constitutes the basic infrastructure

which is a must for the smooth flow of business activity.
Characteristics/Features/Nature of services
Intangible : Service are intangible i.e they can’t be seen or
touched. They can only be felt and experienced.

Lack of Homogeneity or inconsistency : Same services may be

provided differently by different service provider. For example
different banks have different schemes.

Inventory : Services should be consumed at the time of

production, no need to maintain inventory. If they are not
consumed then it is a total loss. For ex. empty seats in a cinema
hall.

NOn-trasferability or Inseparability : The service cannot be

separated by from the provider of the service These are produced
and consumed at the same place only. For example the doctor
and his services are inseparable.

Customer’s Participation or Involvement : To experience a service

the participation of the customer is essential. For example the
patient must be present to take benefits of the service.

Difference between Goods and Services

 Basis Of
Difference Services Goods
Services are Goods are
1. Intangible intangible tangible
Not Required to Inventory must be
2. Inventory make inventory maintained
Services can’t be Goods can be
3. Inseperable separated from the separated from
provider provider

It is difficult to
4. Standardize
standardize and
Goods can be
maintain quality standardized

5. Type Heterogeneous Homogeneous

It is an activity or It is a physical
6.
Nature process, e.g. object. e.g. a tv,
Watching a movie car etc..
Transfer of Ownership cannot Ownership can
7.
ownership be transferred be transferred

Classification / Types of services

Business Service Social Service Personal Service

 Business Services
Services used by business enterprises to carry out business
activities smoothly are called business services. For example
: banking, insurance, transportation, etc...
Social Services
Services which are carried out
voluntarily to achieve social goals and
uplift the standard of living of the
weaker section of a society are called
social services. For Example :
provide health care, improve sanitation in slum, education, etc... .
They are carried out by government, NGOs and business
enterprises.

Personal Services
Services offered to individuals are called Personal services. Personal
services are experienced differently by different customers. For
example restaurants, tourism, etc...

Various Categories of
Business Services

BANKING

INSURANCE TRANSPORTATION

POSTAL & TELECOM WAREHOUSING

 Banking Services

A bank is an institution which accepts

money (i.e deposits) from others for the
purpose of lending to industry or trade.
Types of Accounts

Savings Deposit Account

Current Deposit Account

Recurring Deposit Account

Fixed Deposit Account

Multiple Option Deposit Account

Savings Deposit Account

1. Anyone can open a savings account by depositing a small sum of
money.
2. He can withdraw and deposit money whenever needed.
3. Depositor issued a cheque book, passbook and a debit card.
4. All transactions are recorded in passbook.
5. He depositor earns an interest on the deposited sum but the
interest is generally less that FD (fixed deposits) .
Current Deposit Account
1. These accounts are generally opened by businessmen for
their business transaction.
2. Withdrawals are always made by cheque.
3. Facilities like Overdraft and Credit Limit is available.
4. The account holder does not receive any interest but pays
a maintenance charge to the bank.
Fixed Deposit (FD) Account
A fixed sum of money is
deposited in the Bank
for a long period of time
and can only be
withdrawn on the expiry
of a specific period.
Longer the period,
higher the rate of
interest.
The Rate of Interest in
highest in FD.
Multiple Option Deposit Account
This account offers multiple options
Recurring Deposit (RD) Account
The Depositor deposits a fixed
sum of money over a period of
time and, interest along with
the amount is repaid on
maturity. The rate of interest is
higher than Savings Account.
y
Higher Liquidit
intere
st rate

to depositors. The depositors can

enjoy the liquidity of the saving
account and the interest rate of FD.
When the amount of Deposit exceed a
particular limit, the amount gets
transferred into FD.
services provided by Banks

Short/Medium/
Banker’s Long term Overdraft
Cheque Loan
Bank Draft Cash Credit
Bank Draft
This is a cheque drawn by one bank
against the funds deposited in its
account in another bank, authorising
the second bank to make payment in the individual
account whose name is written in the draft. A bank
draft is never dishonoured or bounced since the amount
is already deposited in the bank.
Banker’s cheque (Pay Order)
This is the document which instructs the bank to pay a certain
sum to a third party.
It is payable only within the town and hence is called local
bank draft.
The commission charged in Pay order is less than Bank Draft.
OverDraft
This agreement allows the customer having a current
account to withdraw more money (upto a certain limit)
than the balance in his account.
Interest is charged on the amount virtually overdrawn.
Cash Credit
Under this agreement, the borrower is allowed to
withdraw up to a certain limit against a security.
Short / Medium / Long term loan
A loan is a lump sum of money
repayable on expiry of a specific period.
It may be secured or unsecured.
The loan may be paid in installment.
 Digital Payment/ Electronic Functions/ E-Banking

Digital/Electronic Payment is a system of making online

payment without involving physical exchange of money
Different methods of E-Banking

Debit card

Credit Card

NEFT (National Electric Fund Transfer)

RTGS

ATM (Automated Teller Machine)

E-Cash/Digital Cash

Debit Card Credit Card

It is a facility offered by
Credit is a substitute of
the banks to the account
cash. Credit card is like
holder that allows them
a bank account without
to make payments upto
without having balance
the credit balance in
in it. Credit card is a
their account. When the
plastic card with the
customer presents the
signature identity of
debit card, the point of
the owner. It enables
sale terminal
the card holder to have
automatically transfers
overdraft facility up to
money from the
a fixed limit depending
customer‘s bank account
upon the credit
to the store‘s bank
worthiness of the party.
account.
 National Electric Fund Real Time Gross
Transfer (NEFT) Settlement (RTGS)
Under this, the fund is directly RTGS are fund transfer
transferred from one account system where transfer of
to another account. The Key money or security takes
difference between NEFT and place in “real time” and on
RTGS is that RTGS is on gross “Gross”basis. There is no
settlement basis and NEFT is on waiting period in RTGS.
Net Settlement Basis. There is
“Gross Settlement ” means the
no Minimum limit in NEFT transaction is settled on one to
whereas RTGS has a minimum one basis without bunching or
netting then with any other
limit of 2,00,000 rs. transaction.
Feature of RTGS
This Electronic system is controlled by RBI. Hence there is no
physical exchange of money.
The RTGS is suited for high value transaction. (min.
2,00,000).
The payment is taken as final and irrevocable.
Fees of RTGS varies from bank to bank, but there is an
upper limit set by RBI.
To use RTGS the bank must use core banking. Core
banking banks are assigned an eleven-digit code.
ATM (Automated Teller Machine)
*Teller : Teller is a
The ATM refers to mechanical and
person who makes
Automatic Teller which can do a payment and accepts
teller‘s job 24 hrs a day at less than Deposits in bank is
half the cost of human teller. known as teller.
E-Cash/Digital Cash
It is a new concept of online payment system. This works
similar to electronic fund transfer. The user must have e-
cash software programme (example: paytm, BHIM etc..)
and e-cash bank account from where e-cash can be
withdrawn and deposited.
Benefits of E-Banking to Customers
Digital Payment and Transparency
24X7 Services
Convenience : Consumer can make payment from
anywhere anytime.
Financial Discipline : It inculcates a sense of financial
discipline by recording each and every transaction.
Unlimited Access
Less Risk : Consumer can avoid travelling with cash.
Benefits To Bank
Competitive Advantage : It provides competitive
advantage to the bank
Unlimited Network : By using E-banking, banks
are not limited to number of branches
Reduced load on Branches : By establishing
centralized database and by taking over some
of the accounting, the load on the branches
can be reduced.
Insurance Services
Insurance is a financial arrangement where
an insurer provides coverage, accepting
premiums to protect the insured against
specified risks or losses.
Important terms used in insurance contract :
Insurer : Is the individual or firm which agrees to
compensate the loss of insured.
Insured : It is the individual of firm who gets compensation
of loss. Insured pays a regular amount of premium.
Happening of Event : It refers to the subject matter of
policy or the kind of losses covered under the policy.
Premium : It refers to the amount paid quarterly, half-
yearly or yearly by the insured to the insurer for getting
compensation at the time of loss.

Principles of Insurance

Principle of utmost Good Faith : According to this

principle, the insurer and the insured must disclose all the
material facts related to insurance policy.
Principle of insurable interest : According to this principle,
the insured must have an insurable interest in the subject
matter of the policy.
Principle of Indemnity : According to this principle the
insurance is not a contract of making profit.
Principle of Contribution : According to this principle, if a
person has taken more than one insurance for a subject
matter, then both the insurer will contribute to the
amount of actual loss.
 The formula used to determine the compensation amount is :

Sum Insured with a particular insurer X Actual Loss

Total Sum assured

*This principle of insurance in not applicable to life insurance.

Principle of Subrogation : According to this principle,
when the insured is compensated for the loss or damage
to the property insured by him/her, the ownership of such
property passes to the insurer.
Principle of Causa Proxima : According to this principle,
the cause or reason for the loss must be related to the
subject matter of the insurance contract.
Principle of Mitigation of loss : According to this
principle, the insured mustn’t be careless with the
property and do everything within his power to protect it.
Types of Insurance INSURANCE

Health
Life Insurance Insurance

Fire Insurance Marine

Insurance

Whole Life
Assurance Specific Policy Cargo
Policy
Hull
Double
Endowment
Insurance Freight
Life Assurance
Policy
Reinsurance
 Life Insurance
The Life insurance is related with two types of risks :
Risk of dying too early.
Risk of dying too late.

Generally people take life insurance due to

two reasons. If they die too early, it will
provide financial support to their family. If they die too late, they
can have financial support and economic independence in old age.

Main Elements of Life Insurance are :

The Contract of Life insurance is a contract of utmost good faith.
The Insurable interest must be present at the time of taking policy.
Insurable insurance is not required at the time of maturity.
Life Insurance is not a contract of Indemnity.

Fire Insurance
Fire Insurance is a contract in which
one party(insurer) in return for a
premium, agrees to indemnify the other
party(insured) for their financial loss
caused due to the damage of the subject matter by fire during a
specific period and upto a specific amount.

Main Elements of Fire Insurance

The insurable interest should be present at the time of taking the
policy and at the time of loss.
The Contract of fire insurance is a contract of utmost good faith.
The Principle of Indemnity is strictly applicable on fire insurance.
The compensation is paid only when the loss is due to fire.
 Marine Insurance
A contract of marine insurance can be defined as an
arrangement under which the insurer undertakes to
indemnify the insured in the manner and to the
extent thereby agreed against marine losses. The
insurer may be cargo owner or a ship owner or
freight receiver. Marine losses are perils of sea i.e storm, collision,
capture, seizure, sinking of ship, etc..
The Different type of marine insurance policies are:
Cargo insurance : The form of marine insurance includes the cargo
Hull Insurance : Under this the whole ship is insured.
Freight Insurance : Such Insurance provides protection against the
loss of Freight.
Main Elements of Marine Insurance
The Insurable Interest should be present at the time of loss.
The contract of Marine Insurance is also a contract of utmost
good faith.
The principle of indemnity if strictly applicable on marine
insurance.
The compensation is paid only when the loss is due to sea peril.

Health Insurance
Health Insurance Provides for payment of medical expenses in case of
illness of the insured person and his family. It provides the following
type of coverage :

Basic Medical Expenses Medical Supplements

Major Medical Expenses Disability Income
Long-term Hospitalisation
 Difference Between Life Insurance and General Insurance
Life Insurance
In case of life insurance, the risk
involved is certain because a person
1. is bound to die sooner
or later
2. Life insurance is a contract of
guarantee.
Life insurance contains the element
3. of protection as well as element of
investment.
In life insurance, the insurable
interest must be present at the
4. time of taking the policy.
In life insurance, there is no
5. coverage for partial loss
6. In case of life insurance, medical
examination of assured is necessary.
In life insurance, the premium once
7. fixed cannot be altered
8. The assured can surrender a life
insurance policy before its maturity insured cannot surrender his policy.
The time period for life insurance is The time period for fire and marine
9. much longer, generally it is 15-20
years
General Insurance
In general insurance, the risk
involved is uncertain. The person
may suffer a loss or he may not
suffer a loss
General insurance such as fire,
marine insurance are the contracts
of indemnity.
General insurance contains the
element of protection only.
In case of fire insurance, the insurable
interest must exist at the time of
taking the policy as well as at the time
of loss. In case of marine insurance,
the insurable interest must exist at the
time of damage.
In case of fire and marine
insurance, partial protection is also
offered
No medical examination is required
in case of fire and marine
insurance
In general insurance, the premium
may be altered at the time of
renewal of the policy.
In case of fire and marine policy,
insurance is generally short, ie, one
year
Difference Between Life, Marine, and Fire Insurance
Basis of difference Life Insurance Fire Insurance Marine Insurance
The subject Subject matter The subject
matter of matter is ship,
1. Subject is any physical
insurance is property or cargo or
matter human life assets freight, etc.

It has It has
It has element of element of element of
protection as well protection protection
2. Element as investment only only

Insurable interest
Insurable interest must be present at Insurable
3. Insurable must be present the time of taking interest must be
at the time of policy as well as at present at the
interest taking the policy the time of loss. time of loss.

Generally it ranges For one year

Duration is
from 5 to 30 years or for period
4. Duration or whole life.
one year only.
of voyage

Principle of Principle of Principle of

indemnity does not indemnity is
5. Indemnity apply applicable
indemnity is
applicable

Loss Loss is not Loss is Loss is

6. measurement measurable measurable measurable

Life insurance has It does not have It does not have

Surrender
7. a surrender value. any surrender any surrender
value value value
 It can be any It cannot be more It cannot be more
8.
Policy amount. than the value of than the market
amount subject matter value of cargo or
ship.
There is element of There is element of The loss at sea
certainty as death uncertainty and may not occur
9. Risk or maturity of there may not be and there may
period is going to any claim not be any
happen so claim.
compensation of
claim is must

Communication Services
Communication refers to exchange of idea, view, message between two
or more persons. Mainly there are two types of communication services:
1. Postal Services
2. Telecom Services

Postal Services
The government at national and international levels provides postal
services. The main features of postal services are:
All the postal services are controlled by the government.
The postal department provides services at national as well as
international levels.
Nowadays various financial services are also offered by the postal
department.
Post offices have also started speed post service to compete with
courier services.
Post offices also provide an important service of telegraphic
communication.
*Due to slow speed and
Postal services are highly reliable bureaucratic nature
The drawbacks of postal services are: businessmen rely on
Slow in speed. private postal services
called courier service:
Bureaucratic in nature.
The various facilities provided by postal department are
broadly categorised as follows :
Financial Facilities : Various saving schemes are offered by post
offices such as Public Provident Fund and Kisan Vikas Patra .
Mail Services : Mail services consist of transmission of articles
from one place to another along with normal transfer
registration facility. They provide security of transmitted
articles and insurance facility that covers all risks in the course
of transmission by post.

Mail Services Offered by Post Office

UPC (Under Postal Certificate)
Registered Post
Parcel Post
Speed Post
Courier Services
Other Services : Apart from these, many other
services are provided by post offices such as :
(a) International money transfer
(b) e-bill post facility, etc.

Telecom Services
Telecom services are the backbone of every business
activity. They facilitate communication. Without
the every business activity would remain a dream only.

The various types of telecom services are :

Cellular Mobile Services : It includes all mobile telecom
services including voice, non- voice, messages, data
service and PCO, etc. They can provide direct
interconnectivity with any other type of telecom
service provider.
 Radio Paging Services : It is an affordable means
of communication. It transmits information to
persons even when they are mobile.
Fixed Line Services : These are primarily
connected through her comic cores laid across
the country. They provide interconnectivity with
other types of telecom services.

Cable Services. These are linkage and switched services within

licensed area of operation to provide entertainment services.

VSAT Services (Very Small

Aperture Terminal) : VSAT is
a satellite-based communication
service that offers business and
government agencies a highly
flexible and reliable communication.

DTH Services (Direct to Home) : It is

a direct satellite- based media
service provided by cellular
companies. To receive this service,
one needs a small dish antenna
and a set-top box. .

Important Questions with Answers

Question : Define business services.
Answer : Business services refer to a specific category of services that are offered by one
organization or individual to another with the primary objective of supporting
and enhancing the smooth operation and functioning of businesses. These
services are typically provided by specialized companies or professionals who
have expertise in their respective areas.
Question : A person insured his Stock Rs.40,000 for Rs.60,000 from a insurance
company. All his stock destroyed in the fire. The insurance company
paid him Rs.40,000 actual value of stock instead of insured amount
of Rs.60,000. Which principle of insurance is followed by the
insurance company? Explain
Answer : The principle of indemnity in insurance states that the purpose of insurance
is to compensate the insured for the actual financial loss suffered, rather
than allowing the insured to gain a profit from the insurance policy. In this
case, they compensated the insured for the actual financial loss suffered,
which is the value of the stock at the time of the loss

Question : Principle of Indemnity is not applied on which Insurance ?

Answer : Life Insurance
Question : Explain the meaning of bank overdraft.
Answer : A bank overdraft is a financial facility provided by a bank to its
customers that allows them to withdraw more money from their bank
account than what is available in the account balance. In other words,
it allows the account holder to have a negative balance up to a certain
pre-approved limit.

Question : Why principle of utmost faith is important in insurance?

Answer : The principle of utmost good faith is essential in insurance as it
requires both the insured and the insurer to provide all relevant
information honestly and transparently. This ensures accurate risk
assessment, fair premiums, and prevents fraudulent claims, fostering
trust and stability within the insurance industry.

Question : What do you mean by e-banking?

Answer : E-banking, or electronic banking, refers to the digital platform that allows
customers to conduct financial transactions and manage their accounts
through the internet. It enables users to perform tasks such as fund
transfers, bill payments, balance inquiries, and online shopping, providing
convenience and accessibility to banking services anytime, anywhere.

NOTE : Worksheet (Important questions of all typology with

answers) is provided as a seperate PDF on website
padhleakshay.com