BUSINESS STUDIES

CH 4
BUSINESS SERVICES (PART 1)

GOODS-
Goods are physical products capable of being delivered to the purchaser and involves the
transfer of ownership from seller to customer .
 Goods are consumed.
Eg-Phone, shoes, laptop, marker ,pen

SERVICES-
Service is any activity or benefit that one party can offer to another that is intangible and
does not result in ownership of anything .
 Services are experienced
Eg-Services provided by a lawyer ,doctor ,airlines,cinema hall

CHARACTERISTICS OF SERVICES(5 I’S)

INTANGIBILITY INVENTORY
INCONSISTENCY INSEPARABILITY
INVOLVEMENT

INTANGIBILITY –
Services are intangible i.e they cannot be touched. They are experiental in nature .

INCONSISTENCY –
Services are inconsistent as different customers have different demands and expectations
and service providers have to alter their services as per the demands of the customers. E.g.-
Beauty parlour ,spa, travel n tourism etc

INVENTORY –
Services are perishable and cannot be stored.
Eg-Railway journey will be experienced when the railways provides.

INVOLVEMENT –
To experience a service the participation of the customer is essential .

INSEPARABILITY –
It means simultaneous production and consumption .The services cannot be separated from
the service provider.
 DIFFERENCE BETWEEN GOODS AND SERVICES

BASIS OF DIFFERENTIATION GOODS SERVICES

1.NATURE A physical product An activity or process
2.TYPE Homogeneous Heterogenous
3.INTANGIBILITY Tangible Intangible
4.INVENTORY Can be kept in stock Cannot be kept in stock
5.INVOLVEMENT Involvement of Participation of customers
customer at the at the time of service
time of delivery is delivery
not required
6.INSEPARABILITY Separation of Simultaneous production
production and and consumption
consumption
7.INCONSISTENCY Different customers Services have to be
getting standardised performed according to
goods.Goods are the demand and
consistent expectations of each
customer .Services are
inconsistent .

TYPES OF SERVICES

BUSINESS SERVICES SOCIAL SERVICES PERSONAL SERVICES

BUSINESS SERVICES-
Business services are those services which are used by business enterprises for the conduct
of their activities.
Eg-Insurance, Banking , Warehousing ,Transportation ,communication services

SOCIAL SERVICES-
Social services are those services that are generally provided voluntarily in pursuit of certain
social goals.
Eg-Charity ,donations

PERSONAL SERVICES-
Personal services are those services which are experienced differently by different
people .These services cannot be consistent in nature .They will differ depending upon the
service provider.
Eg-Tourism ,restaurants ,salon , spa

BANKING
“Bank is a financial institution which accepts money as deposits ,repayable on demand and
also earns a margin of profit by lending money .
 Commercial banks are an important institution of the economy for providing
institutional credit to its customers.

TYPES OF BANKS

COMMERCIAL
BANKS CENTRAL BANK
SPECIALISED
BANKS

COOPERATIVE
BANKS

1.COMMERCIAL BANKS-
Commercial banks are governed by Banking Regulation Act 1949 and according to it
banking means ,”Accepting deposits of money from the public for the purpose of lending or
investment.
There are 2 types of commercial banks :-
a) Public sector banks-are those in which government has a major stake.Eg-SBI,PNB
b) Private sector banks - owned ,managed and controlled by private individuals and they
are free to operate as per market forces. Eg-HDFC,ICICI

2.COOPERATIVE BANKS-
Cooperative banks are governed by the provisions of “Cooperative societies act “ and meant
for providing cheap credit to their members.It is an important source of rural credit .

3.SPECIALISED BANKS –
Specialised banks are foreign exchange banks ,industrial banks,development banks,export
import banks catering to the specific needs .These banks provide financial aid to
industries ,heavy turnkey projects and foreign trade .

4.CENTRAL BANK -
The central bank of any country supervises ,controls and regulates the activities of all
commercial banks of that country .It acts as a government banker .It controls and
coordinates currency and credit policies of a country .
 Reserve bank of India is the Central bank of our country .

TYPES OF BANK ACCOUNTS

1.SAVING DEPOSIT ACCOUNT –Saving deposit account encourages the small savings of
households.Depositor can withdraw money from his account whenever needed and can
deposit when surplus is there.
Depositor is issued a cheque book and passbook. All the amounts deposited and withdrawn
by depositor are recorded in passbook. Rate of interest of savings deposit is generally low
than fixed deposit .

2.CURRENT DEPOSIT ACCOUNT –

Current deposit account are opened by businessmen. The account holder can deposit and
withdraw money whenever desired .
 OVERDRAFT FACILITY IS AVAILABLE IN THIS ACCOUNT

3.RECURRING DEPOSIT ACCOUNT –

A depositor can deposit a fixed amount e.g. Rs 100 every month for a fixed period. The
amount together with interest is repaid on maturity .The rate of deposit on recurring
deposit is higher than that on savings account .

4.FIXED DEPOSIT ACCOUNT -

Money is deposited in fixed deposit account for a period i.e. 1 yr,2 yr or 5 yr.
A fixed deposit is repayable after the expiry of the specified period of time. Longer the
period of deposit ,higher the rate of interest. If the depositor needs money before the
specified period of time, the banks can refund the money deposited after charging some
discount .
THE RATE OF INTEREST IN FD IS HIGHEST .

5.MULTIPLE OPTION DEPOSIT ACCOUNT –

Multiple Option Deposit Account provide multiple options to the depositors.
This account is a combination of savings account or current account and fixed deposit
account .
When the amount of deposits exceed a particular limit, then automatically the amount gets
transferred into Fixed deposit.

FUNCTIONS OF COMMERCIAL BANKS

1.ACCEPTANCE OF DEPOSITS-
The primary function of commercial banks is acceptance of deposits.The deposits are
generally taken through current account,savings account and fixed deposits account.
2.Lending of funds-
The second major function of commercial banks is to provide loans and advances through
deposits.
3.Cheque facility –
A cheque is a piece of document /paper which orders the bank to transfer money from the
bank account of an individual to another bank account .
The person who writes the cheque is called Drawer and the person in whose name the
cheque has been issued is called “Payee”.
Cheques are of 2 types:-
a) Bearer cheque- encashable immediately at the bank’s counter
b) Crossed cheque- is to be deposited in the payee’s account
4.Remittance of funds-
Banks helps in transferring funds from 1 place to another with the help of demand
draft ,NEFT AND RTGS.
5.Allied services-
Banks also provide allied services such as locker facilities,bill payments.They also perform
other services like buying and selling shares and debentures.

SERVICES PROVIDED BY BANKS

1.DEMAND DRAFT –
It is a financial instrument through which money can be transferred /remitted from 1 person
to another .A bank draft can be obtained from the bank after depositing the required
amount in the account.The bank also charges some commission for issuing bank draft .

2.OVERDRAFT –
Under this , a customer having current account is allowed to withdraw more than the
balance in his account .He can withdraw upto a certain limit and for an agreed period of
time. Interest is charged on the amount withdrawn .
3.CASH CREDIT –
Cash credit is a short term loan provided to companies to fulfil their working capital
requirements.The borrower is sanctioned a credit limit upto which it may draw amount
from the bank .The credit limit is determined on the basis of creditworthiness of the
borrower .
In cash credit the borrower is allowed to withdraw upto a certain limit against security.

E-BANKING

E banking stands for electronic banking .E banking is a service provided by banks that allows
a customer to conduct banking transactions such as managing savings, checking
accounts ,applying for loans or paying bills over internet using a personal computer ,mobile
phone.
Benefits of e- banking to customers
1.24* 7 services-
E banking provides 24 hours 365 days a year services to the customer .

2.Convenience-
Customers can make transactions from offices,home or whole travelling through mobile
phones
3.Less risk –
There is greater security to the customers as they can avoid travelling with cash .

4.Unlimited access-
E banking leads to greater customer satisfaction by offering unlimited access to the
bank ,not limited by the walls of the branch

5.Financial discipline-
E- banking inculcates a sense of financial discipline by recording each and every transaction .

BENEFITS TO BANKS
1.Load on branches can be reduced by establishing centralised data base and taking over
some of the accounting functions.
2.Provides competitive edge to the banks

DIGITAL PAYMENTS OR E BANKING SERVICES

1.DEBIT CARD
Debit cards are plastic cards issued by bank and are linked directly to bank account, using
the money in the bank account to pay for purchases.
2.CREDIT CARD
A credit card is a thin rectangular piece of plastic card which lets you borrow funds from a
pre-approved limit to pay for your purchases. The limit is decided by the institution issuing
the card based on your credit score and history.
3.NEFT –
NATIONAL ELECTRONIC FUND TRANSFER
Under NEFT the funds are transferred from 1 account to another .
There is no minimum value for NEFT .
4.RTGS-
REAL TIME GROSS SETTLEMENT
RTGS is a fund transfer system where transfer of money takes place from 1 bank to another
on a real time and on gross basis.
“Settlement in real time “means payment transactions is not subject to any waiting
period .The transactions are settled as soon as they are processed.”Gross settlement
“means the transactions are settled on one to one basis without bunching them .
RTGS is suitable for high value transactions -minimum value of transactions should be Rs
2,00,000.

5.MOBILE WALLETS –
A mobile wallet is a type of virtual wallet service that can be used by downloading an
app(eg paytm).One can add money to the wallet and use the same to make payments and
purchase goods and services .

6.POS terminals –
It is usually a hand held device that reads banking cards .POS terminals are kept at
shops and are used for payments .