Notes - Business Services
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4.1 Meaning of Business Services
In the competitive world, business enterprises are much dependent on business services. It is comprised of two terms. The term business means an enterprise or a firm involved in the trade of goods and services. The term service includes intangible products such as accounting, banking, consultancy, education etc. When these two terms combine, they give us the complete meaning that business services are those services which are used by business enterprise to carry on business activities smoothly.
4.1.1 Nature of Business Services
There are five basic features of business services as follow
Services are intangible which means they cannot be touched. They can only be felt or experienced by the consumers.
Services are inconsistent in nature which means that there is no standard fix for the services. As different customers have different demands. Thus, these are performed exclusively as per the needs, demands and expectations of consumers.
Services have to be consumed as they are produced.
Services cannot be performed earlier in order to use later. They are only performed when the customer asks for it.
It implies that in the service delivery process consumers can participate a lot and can change or modify the service according to the requirement.
4.2.1 Types of Business Services
Different types of business services are
Banking is an act of depositing money in banks and withdrawing it when needed. This act is generally facilitated with the help of commercial banks.
According to Indian Banking Regulation Act, 1949,
“Banking means accepting deposits of money from the public for the purpose of lending or investments of deposits of money from the public repayable on demand or otherwise withdrawable by cheque, draft, order etc”.
Types of Banks
Following are the types of banks
(i) Public Sector Banks: In these banks, the government has a major stake and they mainly emphasise on social objectives rather than profitability, e.g. State Bank of India (SBI), Punjab National Bank (PNB) etc.
(ii) Private Sector Banks: In these banks, the private promoters are the owners/managers/controllers. They are free to operate as-per market forces. e.g. ICICI Bank, HDFC Bank, Axis Bank etc.
Banking Services
Following are the description of various banking services
It is one of the most important functions of banks to accept deposits from public in the form of demand deposits, and time deposits.
(a) Demand Deposits: These are the deposits which are withdrawable on demand, this includes two types of accounts i.e. saving account deposits and current account deposits.
(b) Time Deposits: These are the deposits which cannot be withdrawn before a specified time period, this includes two types of accounts i.e. fixed deposits and recurring deposits.
(c) Saving Account Deposits: These deposits are payable on demand and cheques can be drawn against these deposits, but there are certain restrictions on number of withdrawals.
(d) Current Account Deposits: These deposits are payable on demand and cheques can be drawn against these deposits, there is no restriction on number of withdrawals, also a cheque of higher amount can be drawn (however, the limit is decided by the bank).
(e) Fixed Deposits: These deposits are not payable on demand, also cheques cannot be drawn against such deposits. Minimum period of fixed deposits is 7 days and maximum is 10 years.
(f) Recurring Deposits: These are a special type of fixed deposits, in which people save a fixed amount every month for a fixed period of time, however, they cannot without before maturity.
This is the second important function that banks play, granting loans and advances by keeping a certain fraction of their total deposits (demand + time deposits) in the form of Legal Reserve Ratio.
Lending money may take the form of
(a) Overdraft Facility: Under this, commercial banks a allow their customers to overdrew their current account balance upto an agreed limit against some financial securities such as shares, bonds, etc. Bank charges interest and do not pay any interest on such accounts,
(b) Cash Credit: Against some security, customers can withdraw funds from their accounts upto the sanctioned limit.
(c) Short-term Loans: These loans are given as personal loans, whole amount granted is chargeable to interest,
(d) Discounting Bills of Exchange: Under this, a holder of bill of exchange can get it discounted from the bank before the maturity, banks charges commission on the same.
A bank draft is a type of cheque which is drawn by a bank either on its own branch or on another bank. It is a very convenient, cheap and safe method of remitting money from one place to another. In order to remit money through a bank draft, a person first obtains the bank draft from the bank. For this purpose, he fills in a form and pays the amount of the draft alongwith the prescribed commission. He then sends the bank draft to the receiver by post. When the receiver gets the bank draft by post, he deposits it in his bank. The bank collects the payment from the concerned bank and credits to the customer’s account.
It means the bank draft which is payable within the city or town. It may be called 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.
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. Settlement on ‘Real Time’ means there is no waiting period, in payment-transaction. The transaction is settled as soon as it is processed.
‘Gross’ settlement means the transaction is made on one to one basis without bunching or netting with any other transaction. It is considered as the fastest possible system for transfer of money through the banking system.
Since November, 2005, NEFT has seen an exponential growth. 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. The fund transfers take place at a particular period of time.
Ways of e-Banking
Following ways of e-banking are as
Insurance is a form of contract under which one party agrees in return of a consideration to pay an agreed sum of money to another party to compensate the loss of goods/life. Thus, it can be stated that insurance is a contract by which the loss is likely to be caused by an uncertain event is compensated by the insurer.
In the words of WA Dinsale, “Insurance is a device for the transfer of risks of individuals to an insurer, who agrees for a consideration, to assume to a specified extent, losses suffered by the insured.”
Important Terms Related to Insurance
Functions of Insurance
Some functions of insurance are as follow
Types of Insurance
There are different types of insurance policies, which are as follow
It is a contract by which the insurer, in consideration of a certain premium undertakes to pay to the person for whose benefit the insurance is made, a certain sum of money on the death of the person whose life is insured or on his attaining a certain age.
Life insurance also encourages savings as the amount of premium has to be paid regularly. Thus, it provides a sense of security to the insured and his dependents.
Under a fire insurance contract, the insurer undertakes on payment of the premium and subject to the conditions of the contract to pay or make goods any loss or damage by fire which may happen to the property insured during the period covered by the policy upto the amount specified in the policy.
Normally, the fire insurance policy is for a period of one year after which it is to be renewed from time-to-time.
The premium may be paid either in lump-sum or in instalments. A claim for loss by fire must satisfy the following two conditions
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 caused by perils of the sea.
Such as collision of ship with the rock or ship attacked by the enemies, fire and captured by pirates and actions of the captains and crew of the ship.
Types of Marine Insurance
A health insurance policy is a contract between an insurer and an individual or group, in which the insurer agrees to provide expenses related to treatment and hospitalisation of specified diseases at an agreed upon price (the premium).
Depending upon the policy, premium may be payable either in a lump-sum or in instalments.
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 from the place of production to its consumption.
Thus, it is necessary that to develop our transportation system to keep pace with the requirements of our economy.
Postal Services
(I) Financial Services
(i) 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.
(ii) Kisan Vikas Patra (KVP): It is a saving scheme in which invested money is doubled in eight years and seven months.
(iii) 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.
(II) Mail Services
(i) 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 Post’ on its face, to differentiate it from the ordinary mail.
(ii) 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.’
(iii) 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.
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Courier Services
Courier service is essentially a postal service offered by private sector enterprises. Couriers carry letters, parcels, etc and deliver them more quickly and safely than the post office. Individual business firms and other organisations hire couriers to send letters, documents and samples of products from one place to another. |
(III) Other Services Offered by Post office
(i) Greeting Post: Through post offices, greeting cards can be send to friends and relatives on different occasions.
(ii) Media Post: Business units can send post cards envelopes, etc to their present and prospective customers to build up their brand.
(iii) Direct Post: Business units can send addressed or unaddressed direct post to advertise their business.
(iv) e-Bill Post: Customers of BSNL, Airtel etc. can deposit their bills at the concerned post office.
(v) 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.
(vi) Passport Facilities: A partnership between the postal department and ministry of external affairs enables applicants to apply for passport through post offices.
(IV) Telecom Services
(i) Cellular Mobile Services
(ii) Radio Paging Services
They are affordable means of transmitting information to persons even when they are mobile. It is a one-way information broadcasting solution and has spread its reach far and wide.
(iii) Fixed Line Services
They include voice and non-voice messages and data services to establish linkages for long distance traffic.
(iv) Cable Services
They are linkages and switched services within a licensed area of operation to operate media services, which are essentially one way entertainment related services.
(v) Very Small Aperture Terminal (VSAT) Services
They are satellite-based communication service. They offer businesses and government agencies, a highly flexible and reliable communication solution in both urban and rural areas.
(vi) Direct to Home (DTH) 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.
(v) Other Telecom Services
(i) Video Conferencing: It is the conduct of video conference by a set of telecommunication technologies which allow two or more location to communicate by a simultaneous two way video and audio transmission.
(ii) Voice Mail: It was introduced in the late 1970s. These are essentially digital recordings of outgoing and incoming voice messages that are managed by either on-site or off-site system.
4.2 Impact of Technology on Business Services
The ways in which technology has fundamentally changed business are
Every aspect of business can be handled from remote location if your smart device or tablet is loaded with the correct software.
It allows businesses large and small to move some of their operation to third-party servers accessible via internet connectivity.
With analytics services expanding one can segment the prospects into ever more minute groups in order to target them specifically.
Technology has also increased the ease with which we can all stay in touch.
Services are offered at affordable rates and are often simple enough to use that businesses don’t need to hire dedicated employees or sign long-term service contracts in order to make use of them.
The rise of social networking has shrunk the world and now users can connect without regard to geographical obstacle, financial background, or even social status.
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