Business Services Class 11 Notes

The unit opens by placing business services in the wider picture of commerce, because in the classification of business activities the auxiliaries to trade are a part of commerce, and the service is the part of it that the business does not own the goods for.

• A business service is a service that is provided by a person or a firm to another person or a firm, in the course of a business, for a fee or for a charge, and the essential quality of a service is that it is intangible, that is it cannot be seen or touched or stored, and it cannot be separated from the person who renders it.
• The main difference between a service and a goods is that the goods are tangible and can be stored and resold, while the service is consumed at the moment it is produced, and the goods can be transported, while the service must be produced where the customer is.
• The types of the business services in this unit are three, the banking services, the insurance services and the postal services, and each of the three is examined below in turn.
• The banking services are the accounts that a bank keeps for the customers, and the payment of the money between the banks, and the credit that it lends against the security or on the credit worthiness, and the e-banking, which is the electronic form of all of it.
• The insurance services are the contract by which an insurance company agrees to bear the financial consequences of a specified risk of a person or a thing for a premium, and the services that the insurance companies render are the life cover, the health cover, the fire cover and the marine cover.
• The postal services are the carriage of the mail and the parcel by the state department of posts, and they are graded by the speed, the security and the volume of the consignment, and the courier service is the private and faster version of the same work.
• The auxiliaries to trade that this unit is part of also include the transport, the warehousing, the communication and the advertising, and those four are examined in the internal trade unit, while the banking and the insurance are examined here, and the point to remember is that all of the five exist only to serve the trade and none of them is itself the trade.

The first demand of the syllabus under banking is the types of the bank accounts, and the five to be known by name are the savings, the current, the recurring, the fixed and the multiple option deposit, and each answers a different need of a different kind of customer.

• The savings account is opened by a person or a family or by an institution, and the money that is deposited earns a moderate rate of interest, and the withdrawals are allowed, and there is no overdraft, and the account is meant for the small saver who wants the safety of the money and a small return on it.
• The current account is opened by a firm or by an institution, and no interest is paid on the balance, and the transactions are unlimited, and the withdrawals are allowed even to the extent of the overdraft, and this is the account of the business because the firm needs to receive the payments and to make the payments many times a day without being charged for it.
• The recurring deposit account is one in which a fixed amount is deposited by the customer at fixed intervals, monthly or quarterly, for a fixed period of time at a rate of interest higher than that of the savings, and it is suited to a person who cannot pay a lump sum but can save a small sum regularly, and the deposit matures at the end of the period.
• The fixed deposit account is one in which a particular amount is deposited for a fixed period, of a year or more, at a rate of interest higher than that of the savings or the recurring account, and the withdrawal before the maturity is allowed, but the bank then pays a lower rate of interest, which is the penalty for breaking the contract.
• The multiple option deposit account is a variation of the fixed deposit, and in it the depositor may withdraw any part of the amount or deposit any part of it at any time, while the balance of the amount continues to earn the rate of the fixed deposit, and it is therefore the flexible form of the fixed deposit, and it is the answer for a depositor who wants the return of the fixed deposit without the lock-in of the whole of it.
• The two accounts that a business firm uses are the current account and the fixed deposit, and the two that a household uses are the savings account and the recurring deposit, and the multiple option deposit is chosen by whoever cannot decide between the two habits of the liquidity and the return, and this comparison of who uses which account is the part that the short questions on banking ask.

The second demand of the syllabus is the banking services with a particular reference to the bank draft, the bank overdraft and the cash credit, and these three are the instruments by which the bank actually moves the money or lends it.

• The bank draft is a written order by a bank to another bank or to another branch of the same bank, to pay a certain sum of money to a named person or to the bearer, and the bank charges a small fee for it, and the firm obtains it from its bank and gives it to its creditor in place of a cheque, and it is used for the large payments, and it is safe because the payment is guaranteed by the bank and the drawer cannot stop it, and it is the convenient instrument for the payment of a big bill without the risk of the cheque being dishonoured.
• The bank overdraft is a short-term credit facility that a bank provides to its customer, up to a fixed limit, either against the security of a collateral or sometimes on the credit worthiness of the customer alone, and the interest is charged not on the limit but only on the amount that the customer has actually withdrawn, and the facility is temporary, and the holder may draw up to the limit and may repay it at any time, and it is the answer to a firm that needs a large amount for a few days.
• The cash credit is a credit limit that a bank grants to a borrower against the security of the collateral, which is normally the stock of the goods or the title deeds of a property, and the borrower may withdraw any part of the limit any number of times, and the interest is charged on the amount that is outstanding at each day, and it is the instrument of the trader and of the manufacturer who buys the raw material and sells the finished goods.
• The difference between the overdraft and the cash credit is the security, since the overdraft may be granted without a collateral while the cash credit always rests on the security of the stock or the property, and it is also the purpose, since the overdraft meets a temporary need of cash while the cash credit is a permanent arrangement that lets the firm keep a permanent current account balance and to borrow against the assets it owns.
• Both of them are a borrowed fund and not an owned fund, because the money is repayable with interest and carries a fixed charge on the assets of the firm, and both of them are the short-term sources of the business finance, while the bank draft is neither a loan nor a deposit, but only an instrument of payment.

The third demand of the syllabus is the e-banking, its meaning and the types of the digital payments, and this is the part of the unit that has changed the way a bank actually works.

• E-banking means the electronic banking, that is the carrying on of the banking operations through the electronic means, the computer, the internet, the mobile and the network, instead of by the person and the passbook in the branch, and the services of the bank, the deposits, the withdrawals, the balance, the statement, the transfer and the payment, are all performed electronically, and the advantage is the twenty-four hours, the seven days, the speed, the accuracy and the low cost per transaction.
• The NEFT, the National Electronic Funds Transfer, is the system that transfers the money from one bank account to another, and the transfer is done in batches, that is a group of transactions is settled together, and it is the cheapest of the electronic systems, and the amount can be of any size above a small minimum, and it is done from the mobile as well as from the branch and it is available twenty-four hours a day.
• The RTGS, the Real Time Gross Settlement, is the system for the large value transfers, and the settlement is real time and gross, that is each transaction is settled separately and individually and in full at the moment it is made, and it is used for the amounts of two lakhs and above, and it is a legal tender, and it is irreversible, that is it cannot be cancelled once it has been settled.
• The IMPS, the Immediate Payment Service, is the system that works twenty-four hours a day, that is twenty-four hours, seven days a week, and the transfer takes place immediately, and it is the service that most of the small retail payments now go through, and it works on the mobile number and on the IMPS identifier of the sender and the receiver.
• The UPI, the Unified Payments Interface, is the system of the National Payments Corporation of India that joins the banks, the technology companies and the customers, and it works by the virtual payment address, and it is twenty-four by seven, and it is interoperable, that is any customer of any bank can pay any customer of any other bank from the same application, and the money reaches the account in seconds.
• The other forms of the digital payment that are named in the syllabus are the mobile and the internet banking, the debit and the credit cards, the electronic money, the point of sale terminal and the automated teller machine, and it is the UPI and the IMPS that carry the small payments today while the RTGS carries the large ones.

Insurance is the second of the three business services, and the syllabus names six of its principles and four of its types, and the six principles are where the marks are.

• An insurance contract is a contract in which an insurance company agrees to compensate the insured, that is the person whose risk is covered, for the loss or the damage that may occur to him or to his property, on the payment of a price in advance, which is called the premium, and in return the insurer receives the premium and takes the risk, and this transfer of the risk from many to one is the basis of the insurance.
• The principle of the utmost good faith requires each party to disclose to the other all the material facts, that is all the facts that would affect the decision of the other to enter into the contract, and in the case of the insurance it is the insured, or the proposer of the policy, who carries the duty to make the disclosure, and a concealment of the material fact makes the contract voidable at the option of the insurer.
• The principle of the insurable interest requires that the insured must have a legally recognised interest in the subject matter of the insurance at the time of the contract, so that he has a reason to suffer the loss, and for the property insurance the interest is the legal ownership or the possession of the property, and for the life insurance the interest is the love and the affection, or the legally recognised relationship, that the proposer has towards the life insured.
• The principle of the indemnity provides that the insurer is only to compensate the insured for the actual loss that he has suffered, up to the amount that is insured, and the insured cannot make a profit out of the insurance, and the indemnity is therefore applicable only to the property insurance, that is the fire and the marine and the other non-life, and it is not applicable to the life insurance, because the human life cannot be valued in money and the sum assured is paid to the nominee in any event of the death.
• The principle of contribution provides that when the same risk is covered by more than one insurer under several policies, the insured may claim the full amount from any one of them, but he cannot recover more than the total of the loss from all of them together, and the insurer that has paid has then the right to claim the share of the others in the proportion of the sums that each of them has covered, so that the total of the claim never exceeds the actual loss.
• The doctrine of subrogation provides that after the insurer has indemnified the insured for a loss caused by a third party, the insurer steps into the shoes of the insured and stands in his place, and may then recover the amount paid from the third party who is responsible for the loss, and it is an application of the principle of the indemnity, and the right survives even where the contract of the insurance did not say anything about it.
• The principle of the causa proxima, which in Latin means the proximate cause, that is the nearest cause, provides that the insurer is liable only for those losses that are caused by the proximate cause of the insured peril, and not for the loss caused by a remote cause, and the famous maxim is causa proxima, non remota, spectatur, that is the proximate cause and not the remote cause is to be looked at, and so if the peril insured against has only a remote connection with the loss, the insurer is not liable.

The syllabus names four types, the life, the health, the fire and the marine, and the two words that must be said with each of them are the two things it protects, the life of a person or the property of a person.

• The life insurance is a contract by which the insurer agrees to pay a fixed sum, the sum assured, to the nominee of the insured, that is to the person named in the policy, on the death of the insured during the term of the policy, and the premium is paid by the insured himself during his life, and it is the only insurance in which the amount insured is not a compensation for a loss but a fixed payment, so the principle of the indemnity does not apply to it.
• The health insurance, which is also called the medical insurance, is the contract that covers the medical expenses of the insured, and there are two forms, the indemnity form, in which the expenses of the hospital treatment are reimbursed after they have been incurred, and the cashless or the package form, in which the hospital treats the patient and the insurance company settles the bill directly with the hospital, and the health cover is usually sold as an individual cover, a family cover, a group cover or a senior citizen cover.
• The fire insurance is the contract by which the insurer agrees to compensate the insured for the loss or the damage caused to his property by fire and its allied perils, and the allied perils that the policy may cover are the lightning, the explosion, the earthquake, the flood and the smoke, and the property that is insured may be a factory, a building, the stock, the machinery or the goods in the process of manufacture, and the fire insurance is a contract of indemnity and the claim is limited to the value of the loss.
• The marine insurance is the contract by which the insurer agrees to cover the loss or the damage to the goods, the cargo, or to the ship itself, the hull, that may be caused while the goods or the ship are at sea, and the two divisions of it are the hull insurance, which covers the ship and the machinery, and the cargo or the goods insurance, which covers the goods in the transit, and in the Indian practice the marine insurance is written both for the import and for the export consignment, and the cargo insurance is taken by the buyer as well as by the seller, because the risk passes at the port of shipment under the terms of the sale.
• The difference between the life and the other three is the payment, because the life pays a fixed sum on the death and the other three pay only the actual loss, and the difference between the health and the fire and the marine is the subject, because the health covers the expenses of the treatment of a person while the fire and the marine cover the physical damage to a property or to a cargo.

The postal service is the state service that carries the communication and the small consignments, and the syllabus grades it into five, and the grade is decided by the speed, the security and the volume that the sender is paying for.

• The ordinary post, which is also called the mail or the surface post, is the cheapest and the slowest of the postal services, and it is used for the ordinary letters, the newspapers and the periodicals, and there is no guarantee of the time of the delivery, and there is no tracking, and there is no compensation for the loss, and the postal rules do not allow the insurance of the ordinary post.
• The registered post is a higher grade of the ordinary post, and it costs more because it gives three things that the ordinary post does not, a signed receipt from the office of delivery, a record of the movement of the consignment through the office, and a compensation if the article is lost or damaged, and it is used for the documents and for the articles of value that are not of a commercial value.
• The parcel post is the service for the carriage of a consignment of goods up to a stated weight, and it moves either by the surface or by the air, and it is cheaper than the courier for a heavy consignment, and the tracking of it is limited, and it is the service used for the sample and for the small package of the trader.
• The speed post is a service of the Department of Posts that is faster than the ordinary post, and it is meant for the articles of importance that do not need the security of the registered post, and it travels faster because it moves through the network of the post office without being held up, and it is available across the country.
• The courier service is not of the Department of Posts but of the private courier firms, and it is the fastest of all of these, and it is door to door, and it gives the tracking of the consignment at every stage and the proof of the delivery to the receiver, and it is the most expensive, and it is the service that a firm uses for a document of urgency or for a consignment of high value.
• The order of the cost and the speed runs the same way, that is the ordinary post is the cheapest and the slowest, and then the registered post, the parcel post and the speed post, and the courier is the fastest and the costliest, and the two things that go together with the increase of the cost are the security, that is the tracking and the compensation, and the speed.