Chapter - 4

Business Services
Nature of

Services
 Nature of Services
1 Intangibility
Services are intangible It
cannot touch or taste

Eg: The service of a Doctor

 Nature of Services
2 Inconsistency
Always changing based on the demands and
expectations of different customers as and when it is
needed

E.g. Service given by the mobile service providers

 Nature of Services
3 Inseparability
Services are produced and consumed at a
time

But in case of goods it is not so

 Nature of Services
4 No Inventory
No tangible components in services,
hence cannot be stored for future use
 Nature of Services
5 Involvement
Participation of the customer in the service delivery
process is a must
 Nature of Services
1. Intangibility
2. Inconsistency
3. Inseparability
4. No Inventory
5. Involvement
Differences Between
Services and Goods
 Services Vs. Goods
1

Services Goods
Activity or Physical
Process Object
 Services Vs. Goods
2

Services Goods

Intangible Tangible
 Services Vs. Goods
3

Services Goods
Inconsistent Consistent
(Different
customers
(All customers –
different standardized
demands) products)
 Services Vs. Goods
4

Services Goods
Inseparable
(Production & Separable (at
Consumption at different times)
a time)
 Services Vs. Goods
5

Services Goods
No It has
Inventory inventory
 Services Vs. Goods
Services Goods
Activity or Process Physical Object
Tangible
Intangible

Inconsistent Consistent
Inseparable Separable
No inventory It has inventory
Types of Services
 Types of Services
1 Business Services
They provide services to business enterprises for
the conduct of their activities

Banking, Insurance, Transportation, Warehousing etc.

 Types of Services
2 Social Services
Services rendered voluntarily to achieve
certain social goals
Medical Camp

For improving the standard of living of weaker sections of

society or providing education, health care etc.
 Types of Services
3 Personal Services
They differ based on the tastes and
preferences of customers

Tourist Guide

E.g. Tourism, recreation, resorts etc.

Business

Services
 1

Banking
 Business Services
Banking
Accepting for the purpose of lending or investment of
deposits of money from the public, repayable on
demand or otherwise and may be withdrawn by
cheque, draft or otherwise

Banking Regulation Act 1949

Types of Banks
 Types of Banks

Commercial Cooperative
Banks Banks

Specialised Central
Banks Banks
 Types of Banks
1
Commercial Banks
Institutions dealing in money and credit

Governed by Indian Banking Regulation Act 1949

 Types of Banks
Types of Commercial Banks

Public Sector Banks Private Sector Banks

 Types of Commercial Banks
a
Public Sector Banks
Owned and managed by the government to
channelize bank credit with national priorities
 Public Sector Banks
1969
14 Banks nationalized by Government of India
1980
Another 6 Banks nationalized
Total 28 public sector banks in India
 Types of Commercial Banks
b
Private Sector Banks
Owned and managed by private parties
Governed by the RBI

Free to develop their own policy decisions

regarding banking operations
 Private Sector Banks
34 private sector banks are their in India IDBI,
ICICI, Federal Bank, Catholic Syriyan Bank,
Dhanalakshmi Bank etc.

ICICI Bank is the largest private sector bank in India

 Types of Banks
2
Cooperative Banks
Banks organized based on cooperative
principles

They are governed by the provision of State Cooperative

Societies Act
It is an important source for rural credit.
 Types of Banks
3
Specialized Banks
Organized to render specific services
to the public

Eg., Foreign Exchange Banks, Industrial Banks, Export-

Import (EXIM) Banks etc.
 Types of Banks
4
Central Banks
●
Bankers’ bank
●
Controls and regulates the operations of
all commercial banks in the country
●
Banker to the government and controls the currency and
credit policy of the country
●
The Reserve Bank of India is the central bank of our
country established in 1935
 Functions of
Commercial Banks
 Functions of Commercial Banks
Banks perform a variety of functions
Some of them are the basic or primary functions of a
bank while others are agency or general utility services
in nature
 Functions of Commercial Banks
a Accepting Deposits

Accepts deposits from the public in the form Fixed

Deposits, Savings Bank Deposits, Current
Deposits, Recurring Deposits etc.
 Functions of Commercial Banks
b Lending of Funds
It is the main business of commercial banks and the
interest charged on such advances is the main
source of income

It may be in the form of cash credit, overdraft,

discounting of bills, term loans etc.
Functions of Commercial Banks
c Cheque Facility
Collection of cheques is an important service
provided by the banks to its customers

Crossed cheques (en-cashed through account only) and

Bearer cheques (en-cashed at the bank counters)
 Functions of Commercial Banks
d Remittance of Funds
Transfer of fundsfrom one account to
another is made possible by issuing demand drafts
(DD)
Functions of Commercial Banks
e Allied Services (Personal Services)
It includes Payment of insurance premium,
telephone charges etc. and the collection of
dividend, interest etc.

Insurance premium
E - Banking
 E – Banking
Electronic banking or internet banking
Any user can get connected to the bank’s website to perform
banking operations and services with help of a computer or
mobile phone
E – Banking
Services
 E – Banking Services
a ATM – Automated Teller Machine
 E – Banking Services
b EFT – Electronic Fund Transfer
 E – Banking Services
c PoS – Point of Sale
 E – Banking Services
d EDI – Electronic Data Interchange
 E – Banking Services
e Credit Cards

CREDIT CARD
 E – Banking Services

1.Automated Teller Machiner - ATM

2.Electronic Fund Transfer - EFT
3.Point of Sale – PoS
4.Electronic Data Interchange – EDI
5.Credit Cards
Benefits of
E – Banking
 Benefits of E – Banking
a Any Time Service

Providing round the clock service

 Benefits of E – Banking
b Anywhere Banking

Either at home or at office

 Benefits of E – Banking
c Creates Financial Discipline
 Benefits of E – Banking
d Less Risk and Greater Security

Risk of handling cash reduced

 Benefits of E – Banking
e Workload on Branches Reduced
 Benefits of E – Banking
1. Any Time Service
2. Anywhere Banking
3. Creates Financial Discipline
4. Less Risk and Greater Security
5. Workload on Branches Reduced
 2

Insurance
 Insurance
Contract in writing whereby one party, called the insurer
agrees in consideration of either a single or a periodical
payment called the premium to
indemnify another party called the insured against loss or
damage resulting on the happening of a specified event or
events
Insurance at a glance
Contract
Policy
Insurer

Subject Insurance
Matter
Insured

Indemnity
Premium
Functions of
Insurance
 Functions of Insurance
1 Providing Certainty

Insurance provides certainty of payment when

loss occurs
 Functions of Insurance
2 Protection

Insurance creates a sense of security to the insured

 Functions of Insurance
3 Risk Sharing

The risk of loss can be shared among all the

policy holders
 Functions of Insurance
4 Assist in Capital Formation

The fund collected by way of premium can be

invested in various income generating schemes
This results in capital formation
Principles of
Insurance
 Principles of Insurance
1 Utmost Good Faith

While entering into a contract of insurance, all the

material facts are to be disclosed,
otherwise it will become void
 Principles of Insurance
2 Insurable Interest
The insured must have an interest on the subject matter
of insurance, otherwise the contract of insurance
become void

E.g. A person who has advanced money on the security of a house, has an
insurable interest on that house
 Principles of Insurance
3 Indemnity
All insurance except life insurance and personal accident
insurance are based on the principle of indemnity

Insured is entitled to get only the actual amount of loss

suffered by him and it will not be a source of profit
 Principles of Insurance
4 Causa Proxima (Proximate Cause)
Nearest cause will be considered for compensation

Insured can recover the loss only when it is caused by

any of the risk insured against
 Principles of Insurance
5 Subrogation
After the payment of loss, the whole right of the
property is entitled with the insurer

The insured should not make any profit by selling the

damaged property
 Principles of Insurance
6 Contribution
When the same subject matter is insured with
different insurers the actual amount of loss is
divided among various insurers

Liability of one insurer =

Sum insured with that insurer / Total sum insured X Loss
 Principles of Insurance
7 Mitigation of Loss
It is the duty of the insured to take preventive
measures to minimize the loss of the property

If any expenses are incurred by him for such activities, he is entitled to get
that much of amount along with the compensation from the insurance
company
 Principles of Insurance
1. Utmost Good Faith
2. Insurable Interest
3. Indemnity
4. Causa Proxima (Proximate Cause)
5. Subrogation
6. Contribution
7. Mitigation of Loss
Types of
Insurance
 Types of Insurance
Types of Insurance

Life Insurance General Insurance

Marine Insurance Fire Insurance Other Insurance

 1

Life Insurance
 Types of Insurance
Life Insurance
A person can take a life policy on his own life or on
the life of another person

Eg. Husband on the life of his wife

 Life Insurance
The person who insures his life is called the
assured

Here a specified amount of money is payable on the death of

insured or on the expiry of the specified period
 Types of Insurance
LIC enjoyed monopoly of life insurance business till
the end of 2000

Now we have a lot of private insurance companies

Elements of
Life Insurance
 Elements of Life Insurance
a Valid Contract
Life insurance contract must fulfil all the essential
conditions of a valid contract
 Elements of Life Insurance
b Utmost Good Faith
The insurer and the insured must disclose all material
facts to each other
 Elements of Life Insurance
c Insurable Interest
The insured must have insurable interest in the life of
assured at the time of taking policy, it is not needed at the
time of maturity
 Elements of Life Insurance
d Not a Contract of Indemnity
The life of a human being cannot be compensated in
terms of money

So that the amount payable to the insured on the

happening of the event is fixed in advance
 Types of
Life Insurance
Policies
 Types of Life Insurance
a PoliciesWhole Life Policy
This policy taken for one’s whole life and the
payment will be made to the legal heirs.

Even if the premium is payable for a fixed period, say 20

years, the policy will continue till the death of the assured
 Types of Life Insurance
b PoliciesEndowment Policy
This policy taken for a specific period
e.g. 20 yrs. 15yrs. etc.

Insurance company undertakes to pay a fixed sum when the

assured attains a particular age or on his death whichever is
earlier
 Types of Life Insurance
c Policies Joint Life Policy
Policy taken out jointly by two or more persons
Premium can be paid jointly or by any of them in
instalment or lump sum

This policy matures either on the death of any of the

assured or at the expiry of the period
 Types of Life Insurance
d Policies Annuity Policy
In this policy, the assured gets a regular payment
after he attains a particular age (pension plan)

The premium is paid either in instalment for a definite

period or as a single premium
 Types of Life Insurance
e Policies
Children's Endowment Policy
This policy is taken by a person to provide funds for the
education or marriage of his / her children

If the parent dies before the maturity, the policy will continue to
exist even without the payment of further premium
 2

Fire Insurance
 Fire Insurance
Fire insurance policy is a contract in which the insurer
agrees to pay the loss or damage caused by fire to the
insured

This contract exists only for one year

 Fire Insurance

The claimfor compensation should satisfy the

following conditions:
●
There must be an actual loss
●
The fire is accidental and non-intentional
Elements of
Fire
Insurance
 Elements of Fire Insurance
a Insurable Interest
The insured must have insurable interest on the
subject matter of insurance
It must be present both at the time taking policy and at
the time of loss

Eg. A house property mortgaged to a bank

 Elements of Fire Insurance
b Utmost Good Faith
The insurer and the insured must disclose all material
facts to each other
 Elements of Fire Insurance
c Indemnity
Indemnity is the protection against loss

In the event of loss the insured can recover only the

actual loss and not the policy amount
 Elements of Fire Insurance
d Proximate Cause
The insurer is liable to compensate only when the loss
is due to fire
 3

Marine Insurance
 Marine Insurance
It is a contract whereby the insurer agrees to indemnify
the owner of a ship or cargo against risks which are
incidental to marine adventure in consideration of
premium
 Marine Insurance
It covers a variety of risks like sinking or burning of
the ship, spoilage of the cargo, freight loss etc.

The subject matter of the insurance may be the ship, the cargo
and the freight
 Types of
Marine Insurance
 Types of Marine Insurance
a Ship or Hull Insurance
The subject matter of insurance in this case is the hull
or ship
 Types of Marine Insurance
b Cargo Insurance
Here the cargo is insured

Cargo means goods in the ship

 Types of Marine Insurance
c Freight Insurance
It covers the risk of loss of freight by shipping
companies in the event of loss or
destruction of goods
 Elements of
Marine Insurance
 Elements of Marine Insurance
a Contract of Indemnity
The insured can recover the actual loss if occurred
 Elements of Marine Insurance
b Utmost Good Faith
The insurer and the insured must disclose all material
facts to each other
 Elements of Marine Insurance
c Insurable Interest
Insurable interest need not be present at the time of
taking policy, but it must exist at the time of loss
 Elements of Marine Insurance
d Proximate Cause
The insurer should compensate the insured by
considering the nearest cause for damage, which
must be covered by the policy
Differences between
Life, Fire and
Marine Insurance
 Differences
1 Risk

Life Ins. Fire Ins. Marine Ins.

Maturity or Risk is Risk is

death is sure uncertain uncertain
 Differences
2 Period

Life Ins. Fire Ins. Marine Ins.

Long term Short term Short term

contract (1 year) (1 year)
 Differences
3 Insurable Interest
Life Ins. Fire Ins. Marine Ins.
Must be present
at the time of Must be present
taking the policy on taking policy Needed only in
but not necessary and at the time the event of loss
at the time of of loss
death
 Differences
4 Premium

Life Ins. Fire Ins. Marine Ins.

Premium paid
is returned
with or Will not be Will not be
without returned returned
bonus to the
insured
 Differences
5 Payment of Premium

Life Ins. Fire Ins. Marine Ins.

Monthly,
quarterly,
At the time of At the time of
half-yearly or
yearly taking policy taking policy
instalments
 Differences
6 Indemnity

Life Ins. Fire Ins. Marine Ins.

Not applicable, Loss can be Loss can be
as loss on the measured measured
death cannot and the and the
be insured is insured is
measurable indemnified indemnified
 Differences
7 Objective

Life Ins. Fire Ins. Marine Ins.

Investment Protection Protection
and against loss against loss
protection only only
 Differences
8 Surrender Value

Life Ins. Fire Ins. Marine Ins.

It has
No surrender No surrender
surrender
value value
value
 Differences
9 Double Insurance

Life Ins. Fire Ins. Marine Ins.

Can enjoy the
benefit of
No chance No Chance
double
insurance
 Differences
10 Policy Amount

Life Ins. Fire Ins. Marine Ins.

One can Only up to the Only up to the
insure for value of value of
any amount property property
 Other
Insuranc
e orInsurance
Miscellaneous
 Other Insurance
1 Health Insurance
Reimbursement of expenses due to hospitalization
because of illness
 Other Insurance
2 Motor Vehicle Insurance
Protection against loss to vehicle, passenger or third
parties due to motor accident
 Other Insurance
3 Burglary Insurance
Protection against loss by theft or
house breaking

It covers the risk of loss to stock, cash in safe and

properties in the business premises
 Other Insurance
4 Cattle Insurance
To cover the loss due to death of animals like bulls,
buffaloes, cows etc.
 Other Insurance
5 Crop Insurance
To support the farmers due to crop failures due to
draught or flood
 Other Insurance
6 Sports Insurance
To give protection for amateur sportsmen by
covering their sports equipments, legal liability and
personal accident
 Other Insurance
7 Third Party Insurance
This policy covers the risk of liability that may arise
because of damage to the property of a third party and
the risk of personal injury to such persons

1st party – Insured, 2nd party – Insurer, 3rd party - Outsider

 Other Insurance
8 Employer's Liability Insurance
It is intended to protect an employer against any
liability due to death or injury to his employees during
the course of employment
 Other Insurance
9 Fidelity Insurance
To cover the risk of loss due to fraud or
malpractices by the employees
 Other Insurance
10 Personal Accident Insurance
To compensate the loss due to accident
(death or injury)
 3

Communication
Services
 Communication Services
Communication refers to the flow of information,
ideas, feelings and emotions from one person to
another

To co-ordinate the activities of different departments or

personnel in an organization communication is very
necessary
 Communication Services
Communication

Internal External
Communication Communication
 Internal Communication

Eg: Company mail service, messenger system,

intercom, CCTV etc.
 External Communication

Eg: Postal services, Courier, Telegrams, Network,

Telephone, E-mail etc.
 Postal and Telecom Services
Postal Services
●
Formed by Govt. of India
●
National Postal Services
●
International Postal Services
●
22 Postal Circles
●
Reliable
●
Speed post facility available
 Postal Services
Postal Services

Financial Mail
Facilities Facilities
 Financial Facilities
●
Post Office Savings Schemes like Public Provident
Fund (PPF)
●
Kisan Vikas Patra
●
National Savings Certificates
 Financial Facilities
Retail Banking Services by Postal Dept.
●
RD – Recurring Deposits
●
SB – Savings Bank Account
●
Time Deposits
●
Money Order Facility
 Postal and Telecom Services
Mail Facilities
●
Parcel Service
●
Registration Facilities – ensures security for
postal articles
●
Insurance Facilities for postal articles
 Postal and Telecom Services
Allied Facilities
●
Greeting Post – Greeting cards
●
Media Post – Advt. Through post cards etc.
●
International Money Transfer – Collaborated to
Western Union Financial Services USA
 Postal and Telecom Services
Allied Facilities
●
Passport Facilities – Partnership with ministry of
external affairs
●
E-Bill Post – For collecting bills payments for BSNL
and Bharati Airtel
 Postal and Telecom Services
Telecom Services
●
Cellular mobile services (Mobile
phone service provider)
●
Radio Paging services
●
Fixed line services (Land Line)
●
Cable services (leased lines for banks)
 Postal and Telecom Services
Telecom Services
●
VSAT Services (Very Small Aperture Terminal) –
Satellite based communication service most
reliable in urban and rural areas
 Postal and Telecom Services
Telecom Services
●
DTH (Direct to Home) services
 4

Transportation
 Transportation

Transport means the movement of goods and

persons from one place to another
Importance of
Transport
 Importance of Transport
●
It helps to widen the market
●
Creates place utility and time utility
●
Helps in large scale production
 Importance of Transport
●
Division of labour and specialization is possible
●
Helps in stabilizing prices
●
Standard of living can be improved
●
Providing direct and indirect employment
 5

Warehousing
 Warehousing
“A warehouse is an establishment for the
storage and accumulation of goods”

Production is in anticipation of future demand, the finished

goods are to be stored until it is being utilized in a good
condition in a well equipped godown
 Types of
Warehouse
s
 Types of Warehouses
1 Private Warehouses
Owned by large business houses to store
their own stock
 Types of Warehouses
2 Public Warehouses
Owned and managed by some agencies whose main
occupation is to provide storage space against the
payment of certain fees

They have to obtain a license and their working is subject to some

government regulations
Also known as duty-paid warehouses
 Types of Warehouses
3 Bonded Warehouses

●
Owned by dock authorities or private individuals
●
Supervised by customs authorities
●
Licensed by Government
●
To store imported goods before the payment of
● customs duty
Warehouse keeper collects the customs duty from the
importer when it is released
 Types of Warehouses
4 Govt. Warehouses
Owned by Government

Eg: Central and State Govt. Warehouses, FCI, STC etc.

 Types of Warehouses
5 Co-operative Warehouses
Owned by Cooperative organisations

Eg: National Cooperative Development Corporation,

Cooperative Marketing Federation etc.
Functions of
Warehousin
g
 Functions of Warehouses
1 Consolidation
Receives goods from various plants and dispatch them to a
particular customer on a single consignment
Plant A

Plant B Consolidation
Warehouse

Plant C
 Functions of Warehouses
2 Breaking the Bulk
Bulk quantity of goods from various plants may be divided
into small quantity and send the same to the needy customers
Customer A

Breaking the
Bulk Customer B

Customer C
 Functions of Warehouses
3 Stock Piling
Storage of surplus products
 Functions of Warehouses
4 Value Added Services
Packaging, labelling, grading etc.
 Functions of Warehouses
5 Price Stabilization
Stabilize prices by equalizing supplies
 Functions of Warehouses
6 Financing
Financial assistance may be available by pledging
commodities to the warehouse keeper either from
himself or from a bank on the warehouse receipt