BUSINESS SERVICES

Meaning- Business services mean those services which help in the successful running of a
business. Examples of business services are transport, communication, banking, insurance and
warehousing.
Services are those separately identifiable, essentially intangible activities that provide
satisfaction of wants, and are not necessarily linked to the sale of a product or another service.
Services are all those economic activities that are intangible and imply an interaction to be
realised between the service provider and the consumer
Nature/Features/Characteristics of services

1. Intangibility
Services are intangible, i.e., they cannot be touched. They are experiential in nature.. An
important implication of this is that quality of the offer can often not be determined before
consumption by the service providers that they consciously work on creating a desired service
so that the customer undergoes a favourable experience. For example,treatment by a doctor
should be a favourable experience

2. Inconsistency
There is no standard tangible product, services have to be performed exclusively each time.
Different customers have different demands and expectations. Service providers need to
have an opportunity to alter their offer to closely meet the requirements of the customers

3. Inseparability
Simultaneous activity of production and consumption being performed. This makes the
production and consumption of services seem to be inseparable.Services have to be
consumed as and when they are produced. Service providers may design a substitute for the
person by using appropriate technology but the interaction with the customer remains a key
feature of services

4. Inventory (Less)
Services have little or no tangible components and, therefore, cannot be stored for a future
use; services are perishable and providers can, at best, store some associated goods but not
the service itself. This means that the demand and supply needs to be managed as the service
has to be performed as and when the customer asks for it. They cannot be performed earlier to
be consumed at a later date

5. Involvement
One of the most important characteristics of services is the participation of the customer in
the service delivery process. A customer has the opportunity to get the services modified
according to specific requirements.

Types of services
● Business services-Business services are those services which are used by business enterprises
for the conduct of their activities. Eg banking, insurance, warehousing.

● Social service-social services are those services which are generally provided voluntarily to
fulfill certain goals like improving standard of living of weaker sections, education services to
children.
● Personal service-Personal services are those services which are experienced differently by
different customers. They differ depending upon the service provider. Eg tourism
services, tailoring. etc.
Types of Business services
1. Banking
2. Insurance
3. Communication services
4. Telecom services
5. Transportation
6. Warehousing
1. Banking services

Meaning:Bank is an institution that accepts deposits, withdrawal by cheques and makes loans
and advances for the purpose of earning profits. Modern banks perform a number of other
services or functions like collection and payment of bills of exchange issues letter of credit.

Definition of Banking: According to the Indian Banking Regulation Act of 1949- “ Banking
refers to accepting for the purpose of lending or investment of deposits of money from the
public, repayable on demand or otherwise and withdrawal by cheque, draft , order or
otherwise.”

Types of Banks

1. Commercial banks - These banks are governed by Indian Banking Regulation act 1949.It
accepts deposits, makes loans and advances for the purpose of lending or investment.

The two types of commercial banks are;

● Private Bank
● Public Bank.

Functions of Commercial bank

● Acceptance of deposits – Deposits are the basis of the loan operations since banks are both
borrowers and lenders of money. As borrowers they accept deposits and credit interest
for the amount accepted. There are generally three types of accounts, namely – current
account, savings account and fixed deposit account.
● Lending of funds–Second main activity of commercial banks is to provide loans
and advances out of the money received through deposits. Advances are
provided in the form of overdraft, cash credit, term loan, letter of credit etc., The
funds provided by the bank contribute to the different activities of business i.e.
trade, industry, transport etc.,
● Cheque facility – Banks render a very important service by collecting their cheques
drawn on other banks. The cheque is the most developed credit instrument and
provides for the withdrawal of deposits. It is the most convenient and
inexpensive medium of exchange. There are two types of cheques mainly – Bearer
cheque and Crossed cheque.
● Remittance of funds–Another important function of a commercial bank is transferring
of funds from one place to another on account of interconnectivity of transfers. The
transfers of funds are generally done by way of bank draft, pay order or mail transfers.
The Bank issues a draft for the amount on its own branches
 to other places or other banks at all places. The payee can prevent the draft on the
drawee bank and collect the amount.
● Allied services – In addition to the above functions banks also provide other
supporting services like locker facility, collecting receipts, underwriting of
shares, paying of bills etc.

2. Cooperative Banks- Cooperative Banks are governed by the provisions of State

Cooperative Societies Act and meant essentially for providing cheap credit to their
members. It is an important source of rural credit, i.e., agricultural financing in India
3. Specialised banks- Specialized banks are foreign exchange banks, industrial banks,
development banks, export-import banks catering to specific needs of these unique
activities. These banks provide financial aid to industries, heavy turnkey projects and
foreign trade.
4. Central banks- The Central bank of any country supervises, controls and regulates the
activities of all the commercial banks of that country. It also acts as a government
banker. It controls and coordinates currency and credit policies of any country. The
Reserve Bank of India is the central bank of our country.

E-banking: E-banking means banking transactions carried out with the help of computer
systems (i.e., that is banking over the internet). It is a service provided wherein the user can
get connected to the banks website to perform any of the virtue banking functions and avail
any of the bank’s services

Benefits of e-banking provided to customers

● E-banking facilitates digital payments and promotes transparency in financial statements.
● e-banking provides 24 hours, 365 days a year services to the customers of the bank; ●
Customers can make some of the permitted transactions from office or house or while
traveling via mobile telephone
● It inculcates a sense of financial discipline by recording each and every transaction; ● Greater
customer satisfaction by offering unlimited access to the bank, not limited by the walls of the
branch and less risk and greater security to the customer as they can avoid traveling with cash.
Benefits of e-banking to Banks
● e-banking provides competitive advantage to the bank
● e-banking provides unlimited network to the bank and is not limited to the number of
branches, Any PC connected to a modem and a telephone having an internet connection can
provide cash withdrawal needs of the customer
● Load on branches can be considerably reduced by establishing a centralized database and
by taking over some of the accounting functions.
2. Insurance
Insurance is a means by which one shifts his risks to another. It is a contract between two
parties where the insurer undertakes to compensate the insured against the loss which may
arise on the happening of an event in consideration of a payment called premium.

Functions of insurance
i. Providing certainty – Insurance provides certainty of payment for risk of loss. The
insurer charges a premium for providing the certainty
ii. Protection – Insurance provides protection from probable chances of loss. Insurance
cannot stop the happening of a risk or event but can compensate for losses.
iii. Risk sharing – On the happening of a risk event, the loss or damage is shared by all
the insured members (by way of premium)
iv. Assists in capital formation – The accumulated funds (i.e premium payments made by
the insured members) are invested in various income generating schemes.

Principles of insurance
i.Principle of Utmost good faith – A contract of insurance is a contract of uberrimaei.e., a
contract found on utmost good faith , which means both the insured and insurer should
display good faith towards each other in regard to the contract. The insured must voluntarily
make full, accurate disclosure of all facts and that no material important facts should be
concealed by both the parties of the insurance contract.
ii. Principle of Insurable Interest-There must be some pecuniary interest in the subject
matter of the insurance contract. The insured must have an interest in the preservation
of the thing or life insured, so that he/she will suffer financially on the happening of the
event against which he/she is insured.
iii. Principle of Indemnity-Refers that the insured can get only the compensation against
actual loss and he cannot make profit out of the insurance.
iv. Principle of proximate cause-According to this principle , 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.
v. Principle of Subrogation-After the insured is compensated for the loss or damage of
the property insured by him/her, the right of ownership of such property passes on to the
insurer. This is because the insured cannot make any profit by selling the damaged
property.
vi. Contribution-According to the principle of contribution, if a person has taken more
than one insurance policy for the same risk, then all the insurers are to share the losses
 in proportion to the amount assured by each one of them.
vii. Principle of mitigation of loss-This principle states that it is the duty of the insured
to take reasonable steps to minimize the loss/damage to the insured property; otherwise
the claim from the insurance company may be lost.

TYPES OF INSURANCE
1. Life Insurance: It is a contract under which the insurer, in consideration of a premium,
undertakes to pay a fixed sum of money on the death of the insured or on the expiry of a
specified period of time, whichever is earlier.

Types of Life Insurance Policies (Insurance Products)

Whole life policy- The amount payable to the insured will not be paid before the death of
the assured. The sum becomes payable only to the beneficiaries of the deceased.
Endowment life assurance-The insurer undertakes to pay a specified sum when the
insured attains a particular age or on his death whichever is earlier.
Joint life policy-This policy is taken up by two or more persons. The assured sum is
payable upon the death of any one person to the survivor or survivors.
Annuity policy-The assured sum is payable after the assured attains a certain age in regular
installments.
Children’s Endowment policy-This policy is taken by a person for his/her children to
meet the expenses of their children or marriage etc.

2. Fire insurance: It is a contract whereby the insurer in consideration of the premium paid,
undertakes to make good any loss/ damage caused by fire during a specified period. A claim for
loss by fire must satisfy the following two conditions: ● There must be actual loss., and ● Fire
must be accidental and non-intentional

3. Marine Insurance: A marine insurance is an agreement whereby the insurer undertakes

to indemnify the insured loss against perils of the sea.e.g. collision of ship with the rock,
ship attacked by the enemies, risk of theft of goods, etc
Types of Marine Insurance
1. Ship or Hull insurance – This is an insurance policy for indemnifying the insured for
losses caused by damage to the ship.
2. Cargo insurance – The cargo while transported by ship is subject to many risks, e.g., risk
of theft, loss of goods. These may be at the port or on voyage. Thus , an insurance policy
can be issued to cover against such risk to cargo
3. Freight insurance – Freight insurance is for reimbursing the loss of freight to the
 insured (shipping company), if the cargo does not reach the destination due to
damage or loss in transit because in such a case freight charges are not paid to the
insurance company.

3. Communication services:
These are helpful to businesses for establishing links with the outside world. The main
service is postal and telecommunication.

1. Postal Services: This service is required by every business to send and receive letters,
market reports, parcels, money order etc. on a regular basis. All these services are provided by
the post and telegraph offices scattered throughout the country. The postal department performs
the following services.

a. Financial facilities: They provide postal banking facilities to the general public and
mobilize their savings through the following saving schemes like public provident fund (PPF),
KisanVikasPatra, National Saving Certificate, Recurring Deposit Scheme and Money Order
facility.

b. Mail facilities: The mail services offered by post offices includes transmission of messages
through postcards, Inland letters, envelopes etc. Postal Department also offers allied facilities
of the following types:
• Greetings Post: Greetings can be sent through post offices to people at different places.
• Media Post:Cooperates can advertise their brands through postcards, envelopesetc.
• Direct post – It is used for direct advertising. It can be both addressed as well as
 unaddressed.
• International Money Transfer – This is done through collaboration with Western Union
financial services, USA, which enables remittance of money from 185 countries to India •
Passport facilities – A unique partnership with the ministry of external affairs for facilitating
passport application.
• Speed Post:It allows speedy transmission of articles (within 24 hours) to people in specific
cities.
• e-bill post:The post offices collect payment of bills on behalf of BSNL and other
organizations.

2. Telecom Services: Today’s global business world, the dream of doing business across the
world, will remain a dream only in the absence of telecom services. The various types of
telecom services are:
• Cellular Mobile Services: These companies provide all types of telecom services like voice
and non-voice messages, data services, PCO connectivity etc.
• Radio Paging Services: It is a one way information broadcasting solution and has spread its
reach to a large area. It includes services including tone only, numeric only and
alpha/numeric only.
• Fixed Line Services: These services utilise any type of network equipment connected
through fibre optic cable laid across the length and breadth of the country.
• Cable Services: These are linkages and switched services within a license area of
operation to operate media services.
• VSAT Services: VSAT stands for Very Small Aperture Terminal. It is a satellite based
communication service which is highly flexible and reliable communication solution in urban
as well as rural areas. It is being used for tele medicine, newspaper online, tele-education,
online trading, e-banking etc.
• DTH Services: DTH stands for Direct to Home. It is also a satellite based service provided
by cellular companies which allows one to receive media services through a satellite with
the help of a small dish antenna and a set up box.

4. Transportation

Transportation comprises freight services together with supporting and auxiliary services by all
modes of transportation i.e. rail, road, air and sea for the movement of goods and international
carriage of passengers. Also transport removes the hindrance of place, i.e. it makes good
available to consumers from the place of production.