BUSINESS SERVICES
Introduction:
Business services are those services which are used by business enterprises for the production
or sale of goods and services.
Goods: are those physical or tangible (which can be touched) products which are capable of being
delivered to the purchaser and involves the transfer of ownership from the seller to the purchaser.
e.g., a toy, a movie CD, etc.
Services: are identifiable and intangible activities that provide satisfaction of wants. Service is an act
which can't be taken home, but its effect can be surely be carried. e.g., services of a doctor, a beautician, etc.
In today's competitive world, business enterprises are much dependent on business services, as these
services help the enterprises to carry on their activities smoothly.
♦ Nature of Services:
• Features: Services are explained by five I's namely; Intangibility, Inconsistency, Inseparability,
Inventory and Involvement.
• Intangibility: Services are intangible i.e., they cannot be touched. They can only be experienced.
• Inconsistency: The second important characteristic of services is inconsistency.
• Inseparability: Production and consumption of services take place simultaneously. It is possible
to manufacture a chair today and sell it later but in case of services it has to be simultaneous.
• Inventory: Services have no inventory as they can't be stored.
• Involvement: Consumer gets involved in production of services and gets the opportunity to get the
services modified as per his specific requirement.
♦ Types of Services:
• Social Services: These services are provided voluntarily to achieve certain goals. For example, health
care and education services provided by NGOs.
• Personal Services: Services which are experienced differently by different customers are called personal
services. For example, tourism, restaurants etc.
• Business Services: Services used by business enterprises for the conduct of their business activities.
For example, banking, insurance, communication, warehousing and transportation.
Banking:
Bank means a company accepting deposits of money from public (for lending and investment), repayable on
demand and withdrawal by cheque or otherwise.
Types of Banks:
♦ Commercial Bank:
A commercial bank is that financial institution which accepts deposits from the public and offers loans for the
purpose of consumption or investment. These banks pay interest on deposits and charge more interest on loans,
thereby, enabling them to earn profits. They are governed by Indian Banking Regulation Act, 1949.
Types of Commercial Bank:
• Public Sector Bank: They are owned by government. They are 20 in numbers. E.g. SBI, PNB, C.B., etc.
• Private sector banks: These banks are owned by private promoters HDFC, ICICI, etc.to emphasize more on profitability.
• Foreign banks: They are owned and managed by foreign promoters. For example; Citi Bank, Standard Chartered.
♦ Functions Of Commercial Banks:
• Acceptance of Deposits: Banks accepts deposits from the customers. It is considered as the borrower of money.
As borrower it pays interest on the amount deposited. The various types of accounts in which money can be deposited
are discussed ahead in the topic.
• Lending of Funds: Second major activity of commercial bank is to provide loans and advances, out of the money received
through deposits. The various forms in which banks lend money are also discussed ahead.
• Cheque Facility: The cheque is the most developed credit instrument which helps in the withdrawal of deposits. It is a
convenient and inexpensive medium of exchange. There are two types of cheques.
(a) Bearer Cheques Which are cashable at bank counters, and
(b) Crossed Cheques Which are deposited in payee's account.
• Remittance of Funds: Commercial banks provide the facility of transfer of funds from one place to another with
the help of bank drafts, pay orders or mail transfers, on nominal commission charges.
• Allied Services: The banks also provide services relating to bill payments, locker facilities, underwriting services,
buying and selling of shares and debentures on instructions and personal services, like payment of insurance premium,
collection of dividends, etc.
♦ Types Of Commercial Bank Accounts:
The primary function of commercial banks is to accept deposits. The customers can deposit their money in following
types of bank accounts
• Savings Account: Savings deposit account is meant for individuals who want to save some amount of money out of
their incomes. In this account, customers can deposit money as per their ease and they can also withdraw money by
means of a cheque or a withdrawal slip as and when they need it. The amount deposited in a savings account bank is
referred to as the demand liability of bank.
• Current Account: Such accounts are opened by businessmen by making an initial deposit of ₹ 5,000 in the bank.
There are no restrictions on the amount deposited or the number of withdrawals made. Therefore, it is also referred
to as a running and active account.
• Recurring Deposit Account: In such accounts, the account holder is required to deposit a specified sum of money
every month. They are also termed as cumulative time deposits. The period of account may range from 12 months to 10 years.
• Fixed Deposit Account: In such accounts, a lump-sum amount is deposited for a specified time period which can range
from fifteen days to five years. This deposit is repayable after the expiry of this fixed period. Fixed deposits are also called
time deposits or long-term deposits.
• Multiple Option Deposit Account: It is a combination of savings account and fixed deposit account. In this account, the
depositor can enjoy the liquidity of saving account and rate of interest of fixed deposit account. In this account, the depositor
gives standing instruction to the bank to convert the balance in his savings account into a fixed deposit, if it crosses a given
threshold limit.
♦ Lending of funds by commercial banks:
The second primary function of commercial banks is to lend funds to their customers. The bank can lend money through
the modes specified below
• Bank Overdraft: It is a temporary arrangement under which a depositor is allowed to draw by cheque more than the
amount to his credit upto a specified limit. Overdraft is granted when the borrower has a current account with the bank.
This facility is provided against the security of some assets or on the personal guarantee of the borrower. Interest is charged
on the exact amount overdrawn by the current account holder.
• Cash Credits: It is a revolving credit arrangement wherein the bank allows the borrower to borrow money upto the specified
limit. The bank places the specified amount to the credit of the borrower's bank account. The borrower withdraws money as
and when required. Interest is charged only on the amount actually withdrawn by the borrower. Cash credit limit is decided
by the bank on the basis of the borrower's assets and personal reputation.
• Discounting the Bills of Exchange: The customers who enjoy a good goodwill can get their trade bills discounted by the bank.
The banks credit the amount of the trade bill to the customer's account after deducting discount charges for the period until
the due date.
• Term Loans: Term loans are granted by banks for a fixed period of time, against the security of an asset. This loan can be repaid
in monthly quarterly/half yearly/yearly instalments.
• Consumers Credit: Bank grant loans to consumers to purchase houses, cars, computers, etc. The amount of loan is repaid in
Equal Monthly Instalments (EMI).
♦ Services provided by commercial banks:
Banks offer a wide range of services to their customers. These services are referred to as “banking services' Following are the
description of such services.
• Issue of Bank Draft: A bank draft is a type of cheque which is drawn by a bank either on its own branch or on another
bank. In order to remit money through a bank draft, a person first obtains the bank draft from the bank, fills in a form
and pays the amount of the draft along with the prescribed commission. He, then sends the bank draft to the receiver
by post. The receiver then deposits it in his bank. The bank collects the payment from the concerned bank and credits it
to the customer's account.
• Pay Order or Banker's Cheque: It means the bank draft which is payable within the city or town. It may be called as a
local bank draft. Banks issue pay orders for local use and issue bank drafts for outstations. The commission charged for
a pay order is lesser as compared to bank draft.
• Real Time Gross Settlement (RTGS): It is a fund transfer system under which transfer of funds takes place from one
bank to another on a Real Time and Gross basis. Web Settlement on 'Real Time' means that there is no waiting period
and 'Gross' settlement means the transaction is made on one-to-one basis. It is the fastest possible system for transfer
of money.
• National Electronic Funds Transfer (NEFT): It is a countrywide system by which an individual, firm or company can
electronically transfer funds from any bank branch to another individual, firm or company having an account with any
other bank branch in the country.
• Other Services: Banks also provide e-banking services to its customers.
♦ e-Banking:
e-Banking or electronic banking is a service provided by banks that enables a customer to conduct banking transactions,
such as checking accounts, paying bills etc over the internet, using a personal computer, mobile telephone or handheld
computer. e-Banking includes a range of services like Electronic Funds Transfer (EFT), Automated Teller Machine (ATM),
Electronic Data Interchange (EDI), Credit Cards and Electronic or Digital Cash.
Benefits of e-banking to Customers are:
• e-banking provides 24 hours, 365 days a year services to the customers.
• It lowers the transaction cost and provide unlimited access to the customers.
• It inculcates a sense of financial discipline and promotes transparency.
• Customers can make the transactions from office, home or while travelling.
Benefits of e-banking to Bank are:
• e-banking provides competitive advantages to the bank.
• It provides unlimited network to the bank.
• It also helps in reducing the burden of bank by establishing the centralised database.
♦ Digital Payments:
Digital payment can be defined as a way of paying for services or goods via an electronic medium without the
use of cash or cheque. It is also known as electronic payment system or e-payment system.
Types/ Methods of Digital Payments:
• Banking Cards: These cards have been the most used digital payment modes till now. Credit cards,
debit cards and prepaid cards are the main types of cards with authentication of PIN and OTP for severe
payments. RuPay, Visa and Master cards are some of the example of card payment systems. Banking cards
can be used for online purchases, in digital payment apps, point of sale machines, online transactions, etc.
• Unstructured Supplementary Service Data (USSD): The innovative payment service *99# works on
USSD channel. This method can be used to carry out mobile banking transactions without the use of mobile
internet data. This service can be used to initiate fund transfer and to make balance queries.
• Aadhaar Enabled Payment System (AEPS): It is a way to make financial transactions from the bank
account with the help of your biometric authentication. AEPS can be used for all banking transactions such
as balance enquiry, cash withdrawal, cash deposit, payment transactions, etc.
• Unified Payment Interface (UPI): UPI android apps enable all bank account holders to send and receive
money from their smart phones without the need toenter bank account information.
• Mobile Wallet: It is a virtual wallet that storespayment card information on a mobile device. Mobile wallets
are convenient way for a user to make in-store payments and can be used at merchants listed with mobile wallet
serviceprovider.
• Point of Sale (PoS): Terminals It refers to those machines that are installed at all stores where purchases are
made by customers using credit/debit cards. It is usually a hand held devicethat reads banking cards.
• Internet Banking: It refers to the process ofcarrying out banking transactions online. Internet banking is usually
used to make online fund transfers via NEFT (National Electronic Fund Transfer), RTGS (Real Time Gross Settlement)
orIMPS (Immediate Payment Services).
• Mobile Banking: Mobile banking is referred to theprocess of carrying out banking transactions through a smartphone.
The scope of mobile banking is only expanding with the introduction of many mobile wallets, digital payment apps, 13
UPI and own apps of banks.
• Bharat Interface for Money (BHIM) App It is amobile app developed by National Payments Corporation of India (NPCI),
based on Unified Payment Interface (UPI). The app supports all Indian banks through immediate payment service
infrastructure and allows the user to instantly transfer money between bank accounts of any two parties.
Other Types of Banks:
Apart from commerical banks, other specialised types of banks are also there. These are
• Cooperative Banks: These banks have a common ownership and generally provide short-term loans to the
agricultural sector. They are formed by a group of individuals to extend credit to their members. These are governed
by State Cooperative Societies Act.
• Specialised Banks: These banks are established to cater to certain specific needs of the target groups. Foreign exchange
banks, industrial banks, etc are examples of specialised banks. These banks provide financial aid to industries, heavy turnkey
projects and foreign trade.
• Central Bank: This bank is the apex bank of the country. It supervises and controls the functioning of other banks. It plays
an important role in the banking and monetary system of the country. Reserve Bank of India is the Central Bank of our country.
Insurance:
It is a contract where one party who takes the responsibility of the risk of other party in exchange of some fixed amount which is
called premium.
♦ Principles of Insurance:
• Principle of the utmost good faith: It means that no material or important facts should be concealed by both the parties to
the insurance contract.
• Principle of insurable interest: It means that there must be such a relationship between the insured and the subject matter
of insurance that the insured stands to benefit by its safety and to loose by its loss.
• Principle of Indemnity: It means that the insured person can get only the compensation against actual loss and he cannot
make profit out of it.
• Proximate causes: When the loss is the result of two or more causes, the proximate cause, i.e., the direct, the most dominant
and most effective cause of loss should be taken into consideration. The insurance company is not liable for the remote cause.
• Principle of subrogation: It means that if the insured compensate the insured person then all the rights related to the subject
matter of insurance get transferred to the insurer.
• Principle of contribution: If the same subject matter, except life is insured by more than one person, then the actual loss will
be shared by all the people.
• Principle of mitigation: It means that the insured should try to minimise the loss of the subject matter of the insurer even if
it is insured.
♦ Types of Insurance:
• Life Insurance: Life Insurance is defined as a contact 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 policy is taken,
the assured sum of money, on the happening of specified event contingent on human life or at the expiry of certain period.
♦ Main Elements of Life Insurance Contract are
• It must have all the essentials of a valid contract.
• The contract of Life Insurance is a contract of utmost goods faith.
• In Life Insurance, the insured must have insurable interest in life insured.
• It is not a contract of indemnity.
♦ Types of Life Insurance
• Whole Life Policy: Under this amount payable will not be paid before the death of the assured. It will be payable to legal heir (s).
• Endowment Life Insurance: Under this sum assured is given in full payment after completion of policy / death of insured,
whichever is earlier.
• Joint Life Policy: When a policy taken up by two or more persons, it is called joint life policy.
• Annuity Policy: When policy money is payable monthly, it is called annuity policy.
• Children Endowment Policy: It is a policy for children to meet higher education or marriage expenses.
♦ General Insurance
• Fire Insurance: It is a contract whereby the insurer, in consideration of a 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.
• Marine Insurance: It is an agreement whereby the insurer undertakes to indemnify the insured in the manner and to the
extent thereby agreed against marine losses. It provides protection against any loss by marine perils or perils of the sea.
• Health Insurance
• Vehicle Insurance
• Burglary Insurance and
• Cattle Insurance
• Crop Insurance
• Fidelity Insurance
• Ship Insurance
• Cargo Insurance
• Freight Insurance
Communication:
Communication services are responsible for the transmission of required information to the concerned parties. It is
communication due to which business is able to establish a link with outside world viz., suppliers, customers, competitors,
etc and able to share ideas and information. Communication services should be fast, accurate and effective in order to meet
the demands of business world. Postal and telecom are the two main communication services which help a business.
♦ Postal Services:
The Postage and Telegraph Department provides various postal services throughout the country. The Government of India
has divided the whole country into 22 postal circles. These circles manage the day-to-day working and perform various services
through post offices, subpost offices and branch post offices. Postal department provides various facilities which are explained below.
♦ Financial Services:
Financial services were initiated in the post offices due to lack of banking facilities in the country. The details of such facilities
are as follows.
• Public Provident Fund (PPF): Any adult residing in India can open a Public Provident Fund Account in a post office and
in specified banks. The account holder is required to deposit every year an amount ranging between 500- 1 lakh in his PPF
account. Interest is credited every year at the prescribed rate.
• Kisan Vikas Patra (KVP): It is a saving scheme in which invested money is doubled in eight years and seven months. The
‘Kisan' in Kisan Vikas Patra does not mean that it is only for farmers. It is meant that the revenue mobilised by this scheme
will be used by the government in welfare schemes for farmers.
• National Savings Certificate (NSC): One can buy NSC from the post offices. The term of NSC is five years. A new NSC with
a maturity of ten years has been introduced. The principal amount alongwith accumulated interest is paid on maturity.
♦ Mail Services:
The postal department provides facilities for transmission of post cards, inland letters, parcels, etc from one place to another.
Various types of mail services offered by the Post and Telegraph Department are described below
• Registered Post: It is a postal facility under which it is ensured that the mail is either delivered to the address or it comes
back to the sender by paying registration charges. The registered mail is marked ‘Registered s Post' on its face, to differentiate
it from the ordinary mail.
• Parcel Post Parcels: of specified size and weight can be sent to domestic and international locations under this service. Postal
charges for parcels depend on the weight of the parcel and are reasonably low. Charges for foreign parcel post are higher than
that for inland parcel post.
• Speed Post: This service is designed for very fast delivery of mail. The Post and Telegraph Department guarantees that all internal
mail received upto 5 pm at the specified post offices will be delivered within 24 hours. If it fails to do so, the extra fee charged for
this service will be refunded.
♦ Other Services Offered by Post Office
• Greeting Post: Through post offices, greeting cards can be send to friends and relatives on different occasions.
• Media Post: Business units can send postcards envelopes, etc to their present and prospective customers to build up their brand.
• Direct Post: Business units can send addressed or unaddressed direct post to advertise their business.
• e-Bill Post: Customers of BSNL, Airtel etc. can deposit their bills at the concerned post office.
• International Money Transfer: A collaboration between Postal Dept. and Western Union Financial Services, USA has
enabled customers to remit money to 185 countries through a post office.
Telecom Services:
In today's world, the dream of doing business across the world is only possible with the presence of telecom infrastructure.
It is the backbone of every business activity. Considering potential of this sector, Government of India created a vision of
becoming IT super power by the year 2025. It has developed new Telecom Policy Framework 1999 and Policy 2004 to provide
high level and universal services to all uncovered areas of the country. The various types of services offered by telecom service
providers are as follows
♦ Cellular Mobile Services: They include mobile telecom services like voice and non-voice messages, data services and
PCO services by utilising any type of network equipment within their service area. They can also provide direct inter
connectivity with any other type of telecom services.
♦ Cable Services: They are linkages and switched services within a licensed area of operation to operate media services.
They are essentially one-way entertainment related services.
♦ VSAT (Very Small Aperture Terminal) Services: They are satellite-based communication service. They offer highly
flexible and reliable communication solution in both urban and rural areas. VSAT offers the assurance of reliable
and uninterrupted service. This service can also be used to provide innovative applications such as tele-medicine,
online newspapers, tele-education, etc.
♦ DTH (Direct to Home) Services: They are satellite-based media services provided by cellular companies. One can
receive media services directly through a satellite with the help of a small dish antenna and a set top box. The service
provider of DTH services provides a bouquet of multiple channels.
Transportation:
It is the movement of people, animals and goods from one location to other. It includes land, air and water ways for the
movement of people and goods within and outside the country. In context to business transactions, transportation removes
the hindrance of place i.e., it makes goods available to the consumer by transferring it from the place of production to the place
of consumption. Thus, it is necessary to develop our transportation system in order to keep pace with the requirements of our economy.
Warehousing:
A warehouse is a commercial building for storage of goods. They are used by manufactures, importers, exporters, wholesalers,
etc to store their goods until they are sold. Warehouses help the businessmen to keep their stocks in safe custody during dull
season. In this way, it has created time utility. Initially, warehouses were viewed as static unit for keeping and storing goods.
However, in today's world, warehouses are not just storage service providers. They have become logistical service providers in
a cost-efficient manner. They make availability of right quantity, at the right place, in the right time, in the right physical form
and at the right cost.
♦ Types of Warehouses:
• Private Warehouses: They are owned by the manufacturers to store the goods manufactured by them until they
are sold out. The benefits of such warehouses include control, flexibility and improved dealer relations.
• Public Warehouses: They are licensed by the government and are subject to government regulations in respect
of method of operations. Anybody can keep his goods in the public warehouses by paying necessary charges. The owner
of a public warehouse stands as an agent of the owner of goods. These warehouses provide certain facilities also like
transportation by rail and road. They provide certain benefits like flexibility in the number of locations, no fixed cost and
capability of offering value added services, etc.
• Government Warehouses: They are fully owned, licensed and managed by the government. The government manages
them through organizations set up in the public sector. Food Corporation of India (FCI), State Trading Corporation (STC)
and Central Warehousing Corporation (CWC) are its examples.
• Cooperative Warehouses: They are created by the members of cooperative societies to facilitate the interest of certain
marketing cooperative societies or agricultural cooperative societies.
♦ Functions of Warehousing:
• Storage: This is the basic function of warehousing. Surplus commodities which are not needed immediately can be stored
in warehouses. They can be supplied as and when needed by the customers.
• Price Stabilization: Warehouses play an important role in the process of price stabilization. It is achieved by the creation
of time utility by warehousing. Fall in the prices of goods when their supply is in abundance and rise in their prices during
the slack season are avoided.
• Risk bearing: When the goods are stored in warehouses they are exposed to many risks in the form of theft, deterioration,
exploration, fire etc. Warehouses are constructed in such a way as to minimize these risks. Contract of bailment operates when
the goods are stored in wave-houses. The person keeping the goods in warehouses acts as boiler and warehouse keeper acts as
boiler. A warehouse keeper has to take the reasonable care of the goods and safeguard them against various risks. For any loss
or damage sustained by goods, warehouse keeper shall be liable to the owner of the goods.
• Financing: Loans can be raised from the warehouse keeper against the goods stored by the owner. Goods act as security for
the warehouse keeper. Similarly, banks and other financial institutions also advance loans against warehouse receipts. In this
manner, warehousing acts as a source of finance for the businessmen for meeting business operations.
• Grading and Packing: Warehouses nowadays provide the facilities of packing, processing and grading of goods. Goods can
be packed in convenient sizes as per the instructions of the owner.