Business Studies: Class 11 — Chapter 4: Business Services

Services have five basic features that distinguish them from goods, known as the Five Is of Services:

• Intangibility: Services cannot be touched or tasted; they are experiential in nature. Their quality cannot be determined before consumption.
• Inconsistency: There is no standard tangible product. Services must be performed exclusively each time to meet different customer demands and expectations.
• Inseparability: The production and consumption of services occur simultaneously. For example, while an ATM can replace a clerk, the customer's presence is still required.
• Inventory (Less): Services cannot be stored for future use; they are perishable. Only associated goods can be stored, not the service itself.
• Involvement: One of the most important characteristics is the active participation of the customer in the service delivery process.

• Business Services: Services used by business enterprises to conduct their activities (e.g., banking, insurance, transportation, warehousing, and communication).
• Social Services: Services provided voluntarily in pursuit of social goals, such as improving the standard of living for weaker sections (e.g., healthcare and education provided by NGOs).
• Personal Services: Services experienced differently by different customers, depending on the service provider and customer preferences (e.g., tourism, restaurants).

1. Commercial Banks: Governed by the Indian Banking Regulation Act 1949. They accept deposits from the public for lending or investment. They are divided into Public Sector Banks (e.g., SBI, PNB) and Private Sector Banks (e.g., HDFC, ICICI).
2. Cooperative Banks: Governed by State Cooperative Societies Acts, providing cheap credit to members, especially in rural areas.
3. Specialised Banks: Foreign exchange banks, industrial banks, development banks, and export-import banks catering to specific unique activities.
4. Central Bank: Supervises, controls, and regulates the activities of all commercial banks in the country. The Reserve Bank of India (RBI) is the central bank of India.

• Acceptance of Deposits: Offered via current accounts, savings accounts, and fixed deposits.
• Lending of Funds: Providing loans, overdrafts, cash credits, and discounting trade bills.
• Cheque Facility: Collecting and clearing cheques drawn on other banks.
• Remittance of Funds: Transferring funds using bank drafts, pay orders, or mail transfers.
• Allied Services: Bill payments, locker facilities, underwriting, and buying/selling of shares.

Electronic banking uses electronic media to conduct banking transactions over the internet. It lowers transaction costs, adds value, and empowers customers.

Range of e-Banking Services: Automated Teller Machines (ATM), Point of Sales (PoS), Electronic Data Interchange (EDI), Credit/Debit Cards, and Electronic Fund Transfer (EFT) systems like NEFT and RTGS.

• Providing Certainty: Removes uncertainty of risk by promising payment of loss.
• Protection: Compensates for financial losses arising from risks.
• Risk Sharing: Spreads the loss over a large number of exposed individuals.
• Assist in Capital Formation: Accumulated premiums are invested in income-generating schemes.

• Utmost Good Faith (Uberrimae Fidei): Both parties must voluntarily disclose all material facts honestly.
• Insurable Interest: The insured must have a pecuniary interest in the subject matter of the insurance.
• Indemnity: The insurer undertakes to put the insured back in the same financial position as before the loss (not applicable to life insurance).
• Proximate Cause (Causa Proxima): The direct, most dominant cause of the loss must be covered by the policy.
• Subrogation: After compensating the insured, the right of ownership of the damaged property passes to the insurer.
• Contribution: In case of double insurance, insurers share the loss in proportion to the amount assured by each.
• Mitigation: The insured must take reasonable steps to minimise the loss or damage to the insured property.

• Life Insurance: A contract to pay a specified sum on death or maturity. Types include Whole Life, Endowment, Joint Life, Annuity, and Children's Endowment policies.
• Fire Insurance: Covers loss or damage caused by accidental fire over a specified period (usually one year).
• Marine Insurance: Protects against marine perils. Includes Ship/Hull insurance, Cargo insurance, and Freight insurance.

Helpful for establishing links with the outside world. Classified into:

• Postal Services: Managed by the Indian Post and Telegraph Department. Offers financial facilities (PPF, NSC) and mail facilities (parcels, registration, speed post).
• Telecom Services: The backbone of business. Includes Cellular Mobile Services, Fixed Line Services, Cable Services, VSAT Services, and DTH Services.

Comprises freight and passenger services by rail, road, air, and sea. It removes the hindrance of place, making goods available from the point of production to consumption.

Warehouses have evolved from static storage units to dynamic logistical hubs providing value-added services.

Types of Warehouses:

• Private Warehouses: Owned or leased by a company for its own goods.
• Public Warehouses: Operated by licensed agencies for storage of goods by the general public.
• Bonded Warehouses: Licensed by the government to accept imported goods before payment of customs duty.
• Government Warehouses: Fully owned and managed by public sector undertakings (e.g., FCI, CWC).
• Cooperative Warehouses: Set up by marketing or agricultural cooperative societies.

Functions of Warehousing: Consolidation, Break the Bulk, Stock Piling, Value-Added Services (packaging, labelling), Price Stabilisation, and Financing.