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Write short notes on Nature of services.

Nature of Services

There are normally five characteristics of a service. They also distinguish them from items and are called the five Is of services. They are:

(i) Intangibility: Services are hard to understand. Can be understood only by expierence. We can never taste a doctor’s treatment, or touch and feel entertainment. But we can experience it. An important fact which this brings out is that quality of the offer often cannot be found out before consumption and, therefore, buy. It is, therefore, important for the service providers that they consciously work on doing a good service so that the purchaser has a favorable experience. For example, a doctor should give his patient a Good experience so that he comes back.

(ii) Inconsistency: The second important thing of this topic is inconsistency. Since there is no standard tangible product, services should be done exclusively every time. Demands and expectations differ from customer to customer. So service providers need to have an opportunity to switch their offer to meet the needs of the customers. Its happening in the case of mobile services.

(iii) Inseparability: Another important aspect of services is that production and consumption should have to be done simultaneously. It shows that production and consumption of services are inseparable. With services that have to be consumed as and when they are produced its not the case like manufacturing a car today and selling it later. The interaction with the customer remains a key feature of services and cannot be replaced with any technology. Today Automated Teller Machines (ATMs) have replaced the banking clerk for the front office activities, but still the presence of the customer, is needed and his/her interaction with the process has to be managed.

(iv) Inventory (Less): Services do not have tangible components and hence cannot be stored for a future use. I.e., services are unpreserved and vendors can, at best, save some related goods but not the service itself. It means that the demand and supply are needed to be managed because the service has to be done as and when the customer asks for it. For example, a railway journey cannot be experienced until the preserved ticket is not provided.

(v) Involvement: Finally the most important characteristic of services is the contribution of the purchaser during the service delivery process. A purchaser has the chance to get the services altered according to specific needs.


Write down the difference between services and goods.

Difference between Services and Goods

From the above, it is clear that the two main differentiating characteristics of services and commodities are no manageability of tenure and presence of both provider as well as purchaser. While commodities are manufactured, services are done. A service is something which can never be taken away. The only thing we can take away is their effectiveness. And as the services are provided at the consumption point, there are no records. We can see from the above features that we can have following points as differences between commodities and services.


Write short notes on the types of services.

While talking about the service sector, services can be classified into three types, viz., business, social and personal services. They are:

(i) Business Services: These are the services which are used by business enterprises for the management of their activities. For example, banking, insurance, transportation, warehousing and communication services.

(ii) Social Services: These are those services that are usually provided willingly in pursuit of certain social achievements. These achievements may be to develop the status of living for weaker sections of society, to present educational services to their offsprings, or to provide medical care and hygienic surroundings in slum areas. These services are normally provided willingly but for some attention to cover their expenses. For example, Medical care and educational services presented by some Non-government organizations (NGOs) and government bodies.

(iii) Personal Services: These services differ from person to person. They cannot be uniform in nature. They differ according to the service provider. They also rest upon the customer’s choices and needs. For example, tourism, entertaining services, hotels. In the background of better understanding of the business world, we will be bounding our further talk to the first section of the service sector.


What are the benefits of e-Banking.

(i) They provide 24 hours, 365 days a year services to the customers of the bank;

(ii) Customers can also make a few of the permitted transactions from office or house or during travel via mobile telephone;

(iii) It impresses a sense of financial discipline by registering all the transactions;

(iv) More customer satisfaction due to offering of unlimited approach to the bank, not bounded by the walls of the branch and lesser risk but greater security to the customer as they can avoid travel with cash in hand. The banks can also profit by e-banking.

The benefits are:

(i) It gives competitive edge to the bank;

(ii) It gives unlimited network to the bank and is not bounded by the number of branches, Any PC connected to a modem and a telephone having an internet connection can provide cash withdrawal requirements of the customer;

(iii) Load on branches is effectively reduced by establishing centralized data base and by taking over few of the accounting functions.


What are the differences between goods and services.






An event like watching a movie in a theatre.

Physical device like a tape of the movie.





Treatment by a doctor is immaterial

Understandable like the medicines


Different people have different demands

different people having standard demands get satisfied.


Producing and consuming simultaneously

Producing and consuming separately


Cannot be stocked

Can be stocked


Needed by the customers during delivery

Not possible



Explain in detail about banks and the types of banks.


Banks are significant organization of the economy and provide institutional credit to its customers. A banking company in India is the one which transacts the business of banking which means agreeing, for the aim of lending and investment of deposits of capital from the public, repayable on request or otherwise and withdrawable by cheques, draft, order or otherwise. In easy terms, a bank agrees to take money on deposits, repayable on request and also makes a margin of profit by lending money. A bank encourages economic interests in the market by trading in money. It makes transferable the reserves of people and makes funds available to business financing their capital and revenue expenses. It also deals in financial instruments by providing financial services for a cost i.e., interest, discount, commission, etc. Banks are classified as given below:

1. Commercial Banks

2. Cooperative Banks

3. Specialised Banks

4. Central Bank

(i) Commercial Banks: Commercial banks are organizations which involve in dealing with money. They are taken care by Indian Banking Regulation Act 1949 and in accordance to it banking means accepting deposits of money from the public for the objective of lending or investment. The basic types of commercial banks are, public and private sector banks. The government has a major stake in public sector banks and they normally emphasize on social objectives than on gathering profits. Private sector banks are free as they are owned, managed and controlled by private promoters .


Type of Banks

There is varied focus on banking, needs are diverse and method are also different. Thus, we require different kinds of banks to satisfy the above-mentioned difficulties and to operate according to market forces. India has 20 nationalised public sector banks such as SBI, PNB, IOB etc., and other private sector banks like HDFC Bank, ICICI Bank, Kotak Mahindra Bank and Jammu and Kashmir Bank.

(ii) Cooperative Bank: Provisions of State Cooperative Societies Act governs these banks and meant especially for providing cheap credit to their members. It’s a significant source of rural credit i.e., agricultural financing in India.

(iii) Specialized Banks: These are foreign exchange banks, industrial banks, development banks, export-import banks catering to particular requirements of these unique actions. They provide financial help to industries, large turnkey projects and foreign trade.

(iv) Central Bank: This type of bank supervises, controls and regulates the actions of all the commercial banks of the country as well as acts as a government banker. The currency and credit policies of any country are controlled and coordinated by them. The Reserve Bank of India is the central bank of India.


What are the functions of banks.

Functions of Commercial Banks

Variety of functions are performed by a bank. A few are basic or primary functions of a bank while others are agency or general utility services by nature. The important functions are discussed below briefly:


(i) Acceptance of Deposits: Deposits are the base of loan operations since banks both borrow as well as lend money. They pay interest for borrowed money and they grant loans and get interest by lending money. They are normally taken from current account, savings account and fixed deposits. People can withdraw deposits to the extent of the balance at any point of time without any prior notice in current accounts. Savings accounts basically encourage savings by individuals. All banks have to pay rate of interest as speculated by RBI on these deposits. According to the amount as well as number of times in a given period the account holder is restricted to withdraw. Fixed accounts are time deposits and have a higher rate of interest when compared to that of savings accounts. A premature withdrawal is allowed with some percentage of interest being a penalty.


(ii) Lending of Funds: Commercial banks give loans and advances from the money received through deposits. The advances are made in the form of overdrafts, cash credits, discounting trade bills, term loans, consumer credits and other various advances. The funds given out by banks provide a large deal to trade, industry, transport and other business events.


(iii) Cheque Facility: Banks provide a very significant service to the customers by gathering their cheques drawn on other banks. Cheque, which is the most developed credit instrument has a special feature and function of banks for the withdrawal of deposits. The most comfortable and low-cost medium of exchange is the cheque. The two types of cheques are mainly

(a) bearer cheques, which can be encashed right away at the bank counters and

(b) crossed cheques which we have to deposit only to the payees account.


(iv) Remittance of Funds: Another prominent feature of commercial banks is to provide the facility of fund transfer from place to place, with the help of interconnectivity of branches. These transfer of funds are administered with the help bank drafts, pay orders or mail transfers, on minor commission charges. The banks can issue a draft for that amount on its own branches at other locations or other banks at those locations. The payee can handover the draft on the drawee bank at his locality and gather the amount.


(v) Allied Services: Apart from these functions, banks can also present allied services like bill payments, locker facilities, underwriting services. Banks also provide other services like buying and selling of shares and debentures on instructions and other personal services such as insurance premium payment, dividend collection etc.


Explain in detail about the principles of Insurance.

Principles of Insurance

The main ideas of insurance are the rules of activity or conduct agreed by the stakeholders involved in the insurance business. A few principles of utmost importance to a valid insurance contract are the following:

(i) Utmost Good Faith: A bond of insurance is a bond of begrime fidei i.e., a bond sought on utmost good faith. The insurer as well as the insured should display good faith towards each other in repute to the bond. It is the job of the insured to willingly make full, accurate disclosure of all necessary points, material to the risk being shown and the insurer to make clear all the terms and conditions in the insurance bond. Thus, it is compulsory on the proposer to reveal all material points about the subject matter of the proposed insurance. Any point, which is probably going to affect the mind of a judicious insurer in deciding to agree with the proposal of insurance or in fixing the rate of premium is material for this objective. Failure to make disclosure of material points by the insured makes the bond of insurance faulty at the discretion of the insurer.


Examples of Facts to be Disclosed

Fire insurance: Construction of building, fire detection and fire fighting equipment; nature of its use.

Motor Insurance: Type of vehicle; driver details.

Personal Accident Insurance: Age, height, weight, occupation, previous medical history.

Life Insurance: Age, previous medical history, smoking/drinking habits.

(ii) Insurable Interest: The insured is suppose to have an insurable interest to insure himself regarding that subject matter. An important point of this idea is that ‘it is not the house, ship, machinery, potential liability of life that is insured, but it is the financial interest of the insured in them, which is insured.’ Insurable interest means some financial interest in the relevant discussion of the insurance bond. The insured must show some interest in the safeguard of the thing or life insured, so that he/she will endure financially on the happening of the accident against which he/she is insured. With insurance of property matter, insurable curiosity of the insured in the relevant matter of the insurance should be there at the time of happening of the accident. To show an insurable interest however, its unnecessary that one has to be the owner . For example, even a trustee having certain interests can insure their property.


(iii) Indemnity: All insurance bonds of fire or marine insurance are bonds of security. In accordance to it, the insurer is responsible to put the insured, in the event of damage, in the same state that he occupied just before the occurrence of the event insured against. We can say that the insurer takes responsibility to reimburse the insured for the damage caused to him/her due to destruction of property insured. The reimbursement payable and the loss suffered are to be measured with money. Here the principle of indemnity cannot be applied.


(iv) Proximate Cause: By this principle it states that the insured will be reimbursed only if the damage caused is in accordance to the points given in the policy. When there happen to be more than two causes then the cause which is proximate and led to the natural consequence of damage is taken into to consideration. This is the same even in the case of any mishap.


(v) Subrogation: The insurer has the right to stand in the position of the insured after the claim is done, only when the insured is reimbursed from any other alternative source. When the insured is compensated then the right to the property goes in the hands of the insurer. This is to make sure that the insured is not allowed to make any profit, by selling the damaged property or in the case of recovering of lost property.


(vi) Contribution: According to this principle the insurer has the right to call other insurers as well to contribute to the loss. This shows that in the case of more than one insurer the reimbursement has to shared by them in proportion to the amount assured by each. If there happens to be more than one policy then the insured has no right to claim more than the full amount than the damage caused . When one insurer pays everything then the right of asking the other insurer for money ceases.


(vii) Mitigation: according to this principle the insured is bound to take certain steps to minimize the loss amount. Suppose goods kept in a store house catch fire then it’s the duty of the insured to take certain steps to save them. The insured is not suppose to show carelessness that he will be insured later. If the person does not take reasonable care of being cautious then the right of claim maybe lost.


c) Marine Insurance


Life Insurance

Since life is very precious and any unexpected thing can happen, everyone tries to insure themselves. There are every chances for all the individuals to experience something accidental including death. If that’s the case then there will be no one to take care of the other members of the family if they are dependent on that person. The other risk is that the person may live too long that until he becomes old enough to retire . The earnings are going to decrease and end even in the latter. Hence to overcome such difficulties people seek help from the insurance companies . To overcome the uncertainty of life ,life insurance policy was introduced. But as time went on many other insurance policies have come under way according to the individuals needs. Life insurance is defined as a bond 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 the policy is taken, the assured amount, on the happening of a specified event conditional on the human life or at the expiry of time period specified. Hence , the insurance company agrees to insure the life of the person in exchange for an amount called premium. This premium may be paid as a whole or in installments . Hence the company promises to pay certain amount of money either on the death of the person or due to aging(i.e., the expiry of certain period). Thus, the person is sure that a specified amount will be given under any of the given event. This agreement or bond which contains all the terms and conditions is put on paper and such agreement is called the policy. The person whose life is insured is called the assured person. The company hence is called the insurer and the amount the assured person pays to the company is called premium which can be paid in installments. This provides a safeguard for the dependent family members if there is any premature death or aging of the assured. Hence the insurance not only acts as protection but also as an investment. Life insurance indirectly encourages savings as premium has to be paid periodically and hence provides a sense of security. The important points of a life insurance bond are:

(i) The bond is suppose to have all the essentials of a valid contract. Certain things like offer and acceptance, free consent, capacity to enter into a bond, lawful consent and lawful object must be there for the bond to be valid;

(ii) The assured has to be true and honest in giving information to the insurance company as it is a bond of utmost good faith. He should give all the necessary facts to the company accurately;

(iii) The insured must have some interest in the life insurance policy. Without any interest the bond is void. With life insurance, the insured must show some interest while the bond is being affected. It is not necessary that the assured should continue having interest as the bond matures. For example, a person is assumed to have an interest on his life, while a creditor has an interest in the life of the debtor, and a proprietor of a drama company has an insurable interest in the lives of the actors;

(iv) This contract is not a bond of indemnity. The life of the insured cannot be brought back but only some amount of money can be reimbursed and that is why the amount is decided well in advance. The amount reimbursed is fixed earlier to the signing of the bond. Hence its not a bond of indemnity.

Fire Insurance

Fire insurance is a bond whereby the insurer, giving consideration to the premium paid, undertakes to compensate any loss or damage caused by fire accidents during a specified period the amount mentioned in the policy. Normally, the fire insurance is specified only for an year and renewed every year. like other policies the premium is either paid as a lump sum or in installments. A claim for the damage caused Is suppose to satisfy two conditions which are must:

(i) There is suppose to be actual loss; and

(ii) Fire should not be intentional.

The risk covered by a this bond is the damage resulting from fire or any other cause, and which is the closest cause of the loss. If there is a loss due to overheating without any ignition then it will not be regarded as a fire loss. This bond is made on the fundamental principles of insurance

The important ones are:

(i) In fire insurance, the insured should have insurable interest in the matter of insurance and without the interest the bond of insurance is void. In this case the insured must show interest at the time of the bond as well as at the time of the loss. For example, a person has insurable interest in his property, a businessman has insurable interest in the stock he owns, plant, machinery and building, an agent has an insurable interest in the property of his principal, a partner has insurable interest in the property of a partnership firm, and a mortgagee has insurable interest in the property, which is mortgaged.

(ii) Similar to the life insurance bond, even this policy of fire insurance is a bond of utmost good faith. The insured should give true and honest information to the insurance company. It is his duty to disclose accurately the facts regarding the nature of property and risks. To them and at the same time the insurance company should also disclose the facts of the policy to the proposer.

(iii) The bond of fire insurance is a bond of strictest indemnity. The insured can acquire the actual amount of loss from the insurer in case of any loss. But it is subject only to the maximum amount for which it is insured. For example, if a person has insured his house for Rs10,00,000 the insurer is not bound to pay that amount, although the house may have been totally destroyed by fire; but he will pay the actual loss after deducting depreciation within the maximum of Rs.10,00,000. The main purpose of this is that the person should not gain by insurance.

(iv) The insurer would reimburse only after finding out if fire is the proximate cause for damage.


Marine Insurance

A marine insurance bond is an agreement whereby the insurer agrees to undertake to indemnify the insured in the manner and to the extent thereby agreed against marine losses. It gives protection against loss caused by marine accidents like 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. These happenings cause loss, damage or theft of the ship and cargo and non-payment of the cargo and hence marine insurance insures ship hull, cargo and freight. Thus, it is a solution by which the insurer undertakes to reimburse the owner of a ship or cargo for complete or partial loss at sea. The insurer gurantees compensate the losses due to damage to the ship or cargo occurring due to the risks incidental to marine journeys. The insurer is called as the underwriter and the insured pays certain amount of money to get assurance from the insurer. But its slightly different from the other types because there are ship or hull, cargo or goods, and freight all involved at the same time.

(a) Ship or Hull Insurance: Since the ship is exposed to many dangers at sea, the insurance policy is to make sure that they cover the losses caused to the ship..

(b) Cargo Insurance: Even the cargo while being transported by ship has got many risks like risk of theft at the port, lost goods or on voyage etc. Thus, an insurance policy is required to cover against such risks as well.

(c) Freight Insurance: The company is not paid freight charges in case there occurs any loss or damage during the journey. Hence for reimbursing the loss of freight to the shipping company the insurance can be taken.

The fundamental principles are similar to the general principles. The important points are:

(i) The insured is allowed to get the actual amount of loss under any event of damage but is not allowed to make profit out of the marine insurance bond in any case. But in the case of cargo policies commercial indemnity is provided and the insurer indemnifies the insured "in the manner and to the extent agreed." While for ‘Hull Policy’, the amount is fixed according to the current market value;

(ii) The bond of marine insurance is a again a bond of utmost good faith. The insurer and the insured must disclose everything regarding the subject matter. The insured must accurately disclose all facts about the nature of shipment and the risk of damage to which it is exposed;

(iii) Insurable interest may not be present while the policy was taken but should be there at the time of loss;

(iv) The proximate cause of damage will be taken under consideration in case of any damage and the insurance company will pay only if that particular cause is covered by the policy.


What do you mean by Communication Services? Explain.

Communication Services

Communication services are helpful in applying contacts to the outside world viz., suppliers, customers, competitors etc. Business has to communicate with others for sharing of ideas and views rather than being in isolation. They need to be fast and accurate in order to be efficient. Today’s world is a competitive world and it is necessary to have advanced technology for quick exchange of ideas. The services which help business are mainly classified into postal and telecom.

Postal Services

Indian post and telegraph department provides postal services across India and the whole is divided into 22 different circles. Various head post offices, sub-post offices and branch post offices are managed by these circles. The facilities provided by the postal services are broadly classified as following:

(i) Financial Facilities: Financial facilities are provided with the help of post office’s savings plans like Public Provident Fund (PPF), Kisan Vikas Patra, and National Saving Certificates along with normal retail banking functions of monthly income schemes, recurring deposits, savings account, time deposits and money order services.

(ii) Mail Facilities: These provide facilities such as transport of articles from one place to another ;To provide security of the transmitted articles there is a registration facility and to provide insurance cover for all risks in the course of transmission by post we also have an insurance facility. Other allied facilities are also offered such as:

1. Greeting Post - we get a variety of delightful greeting cards for every occasion.

2. Media Post - helps the Indian corporates to advertise their brand through postcards, envelopes, aerograms, telegrams, and also through letterboxes.

3. Direct post for direct advertising is available which can be either be addressed or unaddressed.

4. International Money Transfer by collaborating with Western Union financial services, USA, helps us in remitting money from 185 countries to India.

5. Passport Facilities - in partnership with the ministry of external affairs for the ease of applying for a passport.

6. Speed Post: having over 1000 destinations in India linking 97 major countries across the globe.

7. e-bill post is the latest of all in this department to collect bill payment across the counter for BSNL and Bharti Airtel.


Telecom Services

A world class telecommunications infrastructure helps in rapid economical and social development of the country and is the back bone of every economy. We can say that a dream of having a business across continents will remain a dream in the absence of telecom infrastructure. There have been a lot of developments in the fields of telecom, IT, consumer electronics and media industries all over the globe. The Telecom Policy Framework in 1999 and Broadband Policy in 2004 were developed by the Indian government in order the world to recognize India as a superpower by 2025 . With the help of this the government intends to provide both universal services to all uncovered areas and high-level services for catering the requirements of the country’s economy. The different types of telecom services are:

(i) Cellular Mobile Services: These include all types of mobile telecom services along with voice and non-voice messaging, data services and PCO services and use any type of network equipment present within their service area and also can provide interconnectivity with other service providers.

(ii) Radio Paging Services: This kind of service is useful in contacting a person even when he/she is mobile. But it’s a one way broadcasting system and has spread far and wide. Radio paging provides services like tone only, numeric only and alpha/numeric only.

(iii) Fixed Line Services: These include all types of services like voice, non voice and data messages for establishing long distance calls. These can utilize any type of network equipment which is connected through fiber optic cables laid across the length and breadth of the nation. Interconnectivity with other telecom services is also provided.

(iv) Cable Services: These are established one way linkages and switched services which are licensed to operate in a permitted area for providing media to people. The two way service of the same including voice and data messaging is likely to emerge soon. Then services through the cable network will be similar to that of fixed services.

(v) VSAT Services: Very Small Aperture Terminal is basically a satellite-based telecom service. It provides the businesses and government agencies a highly flexible and reliable communication service to both urban and rural areas. VSAT offers continuous and uninterrupted services equal or better than any land based service . It is also used to provide innovative information such as tele-medicine, newspapers-on-line, market rates and tele-education to the most remote areas of our country.

(vi) DTH Services: DTH (Direct to Home) provides satellite based media services by which one can receive media services directly with the help of a small dish antenna and a set top box right to their home. The DTH service provider provides a large number of channels. They can be viewed without any help from the local cable network provider.

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