CH- 4 Business Service NOTES

Business services-Business services are those services which are used by business enterprises for the
conduct of their services. These are also known as Auxiliaries to trade.This sector is the backbone of the
modern industrial system. These services include-banking, postal, insurance, warehousing, transport,
customer care, internet and The following are the basic features of services-

1. Intangibility-Services are intangible, ie., they cannot be touched. An important implication of this is
that quality of the offer which cannot be determined before consumption. Services can only be
experienced by the consumers, e.g., treatment by a doctor. One cannot taste a doctor's treatment, or
touch entertainment.

2. Inconsistency/Variability-Services are inconsistent in nature, which means that there is no standard

fixed for the services. As different customers have different demands, these are performed exclusively
as per the needs, demands and expectations of consumer.For example, banks and mobile phone service
providers keep changing their offers from time to time.

3. Inseparability-Very often production of services cannot be separated from its consumption. Both of
them take place simultaneously. For example, you cannot tell a hair stylist to style your hair and keep it
ready, till you come back from your school. This is because the customer who is looking for this service
has to be physically present when the service is being offered.

4. Involvement-The participation of the customer in the service delivery process is a must. As a result, a
customer can get the services modified according to the specific requirements. For example, when you
go to a restaurant and order a particular dish from the menu card, your own presence is a must.

5. Inventory-Services have little or no tangible components and therefore, cannot be stored for future
use. That is, services are perishable and providers can, at best, store some associated goods but not the
service itself. Services cannot be performed earlier which have to be consumed at a later date. So, there
is no need to maintain inventory or stock of services. If the service is not consumed immediately then it
is a total loss.

Banking
Bank is an institution that accepts deposits from general public, payable to them on demand through
cheques and lends money to the borrowers at an appropriate rate of interest and earns profit thereby.
"A banking company means, any company which transacts the business of banking". The act defines the
term 'Banking' as "The accepting for the purpose of lending or investment, of deposits of money from
the public, repayable on demand or otherwise, and with drawable by cheque, draft order or otherwise"

Types of Bank Account

Keeping in mind the needs and interests of various sections of society, banks provide various types of
accounts. Some of the important accounts are as under-
1. Current Account/Demand Deposit Account- Such accounts are opened by businessmen by making an
initial deposit of an amount which varies according to different bank. A minimum credit balance of such
initial deposit amount has to be maintained in the account otherwise bank will charge a penalty. There
are no restrictions on the amount deposited or the number of withdrawals made. It is known as Demand
Deposit Account. Banks do not pay any interest on this account whatever may be your balance.
Overdraft facility is given only in this account. Bank charges are applicable to this account for the
services they provide to the businessmen.

2. Savings Bank Account-This account is meant for individual .They can withdraw money as per their
ease by means of a cheque or a withdrawal slip. Customers can deposit money as per their ease. This
account is meant for individuals who want to save some amount of money out of their incomes.
Nowadays banks are giving interest in this account on the basis of daily credit balance by 'product
method. The normal rate of interest varies from 2.7 per cent to demax 5 per annum.

3. Recurring Deposit Account-This account is very useful for a large number of population. Everyone plea
makes a programme for future needs, viz., purchasing a house, celebrating marriage or education for
children. In this account, a customer deposits some fixed amount every month for a period of one year
to twenty years depending upon his needs. This account is also known as cumulative time deposit. This
account helps people to develop the habit of savings

4. Fixed Deposit Account/Time Deposit/Long-term Deposit-In such accounts, a lump-sum amount is

deposited for a specified time period which can range from fifteen days to five years.The rate of interest
is maximum in this account because the banks can use this money without hesitation for giving loans to
the needy person. This deposit can be withdrawn after the expiry of the period for which it has been
made in the beginning. In case a customer wants money at an earlier date, banks give loan against the
F.D. receipts. They will charge interest varying 1-2% on more than what is being given on FD.

5. Multiple Option Deposit Account-It is a combination of savings account and fixed deposit account. In
Capital this account, the depositor can enjoy the liquidity of savings account and interest rate of fixed
deposit account In this account, the depositor gives standing instruction to the bank to convert the
balance in the savings account into fixed deposit.

Banking Services

Commercial banks offer a wide range of services to the business and general public in addition to
accepting explained below:

Acceptance of deposits-Deposits are the basis of the loan operations, since banks are both borrowers
and lenders of money. As borrowers, they pay interest and as lenders, they grant loans and get interest.

Lending of funds-Second major activity of commercial banks is to provide loans and advances out of the
money received through deposits. The funds lent out by banks contribute a great deal to trade, industry,
transport and other business activities. These advances can be made in the form of overdrafts, cash
credits, discounting trade bills etc.

Bank Overdraft-An overdraft occurs when money is withdrawn from a bank account and the available
balance goes below zero. In this situation, the account is said to be "overdrawn". Thus, an overdraftis a
financial accommodation under which a current account holder is permitted to overdraw his accoun
beyond the available balance up to an agreed limit.

Cash Credit-A cash credit is a short-term cash loan to a company. It is a financial accommodation under
which an advance is granted on a separate account called Cash Credit account up to a specified limit. he
bank provides this type of funding, only on security of goods or personal security of one or more persons
other than the borrower.

Bank Draft-It is a financial instrument for transfer of amount from one place to another without the rise
of default. Here, a person required to pay a certain amount to another person deposits the said amount
with his bank and the bank issues a bank draft for an equal amount in the name of payee. The payee
presents the draft in his bank and the amount is paid to him by his bank.

Cheque facility-A banker's cheque is a payment instrument which is used by the banks to settle
payment obligations on behalf of their customers and also to assist the account holders to withdraw
their account balance. branch of issue and are used for payment within the local clearing jurisdiction.

e-Banking

e-Banking or Internet Banking or electronic banking refers to performing the banking functions and
activities in a virtual mode, without having to visit the bank branch, through the use of Internet. Thus,
any user having access to internet can perform the required banking activities from anywhere. There is
no human operator required to respond to the needs of the customer.

The bank has a centralised database that is web-enabled and all the services that the bank has
permitted on the internet are displayed on a menu. Any service can be selected and further interaction
is dictated by the nature of the service.

1. Banking Cards-

(a) Debit Card-Debit card is a plastic card that provides the card holder more person electronic
access to his bank account. Debit card is directly connected to the account of the holder. Using the
card, one can withdraw and transfer money, pay for shopping expenses without using physical cash.

(b) Credit Card-Credit card is a plastic card that is usually used to pay for purchase of services or
goods. The bank pays for purchase of goods or services on behalf of the account holder at the time
of transaction and later collects the same from the account holder. It is a form of credit given by the
bank to the user, on which the bank usually charges a high interest.
(2) Unstructured Supplementary Service Data (USSD) -It is a digital payment method that allows
without started and/or internet connection to use the e-Banking services. Thus, this meth 99 without
any mobile application and without mobile data. The services are enabled through use of *99# code.
The transaction method is backed by the NPCI-National Payments Corporation of India. The main
objective of this services to allow financial inclusion of the economically weaker and the underbanked
sections of the society.

(3) Aadhaar Enabled Payment System (AEPS)-It is a service used for banking transactions of can
withdrawal, balance inquiry, cash deposit and fund transfer. Here, the services are enabled through
Aadhaar authentication or verification without requiring to visit bank branch. Accordingly, these services
can be availed only if Aadhaar is linked to the bank account. To avail the services, the user is required to
visit a micro ATM and perform the required transaction after verifying his Aadhaar.

(4) Real Time Gross Settlement (RTGS)-RTGS is a fund transfer system where transfer of money takes
place from one bank to another bank on a real time and on a gross basis. Real time means transactions
are done without any wastage of time and Gross basis means transactions are settled on one-to-one
basis without netting of any transactions. The facility is available only with bank branches enabled with
CBS, for a minimum amount of 2,00,000 with no upper cap. The payments can be processed on a 24x7
basis for 365 days, for which a fee is charged varying from bank to bank.

(5) National Electronic Fund Transfer (NEFT)-NEFT is a fund transfer system wherein money is
transferred from one bank account to another account in batches. It means that the settlement of the
transactions takes place on a net basis at a particular point of time, till when all the transactions are held
in process. The facility is available only with bank branches enabled with NEFT, with no minimum and
maximum limit. The payments can be processed on a 24 x 7 basis for 365 days without any charge for
the same.

(6) Unified Payment Interface (UPI)-It is a digital payment platform, developed by National Payments
Corporation of India, that allows users to transfer money directly between bank account. It merges
various bank accounts and banking services under one umbrella, whereby payments are processed on a
real time basis only through the use of a UPI ID and UPI PIN. The UPI ID is linked to the bank account and
mobile number of the user and can be used for payments on a 24 x 7 basis for 365 days without any
charge for the same. The service can be availed through the use of mobile applications such as Google
Pay, PhonePe, Amazon Pay, etc.

(7) Point of Sale (PoS)-Traditionally, PoS terminals were installed at all stores where purchases were
made by customers using credit/debit cards. It is usually a handheld device that reads banking cards.
mobile PoS terminals work through a tablet or smart phone. This is advantageous for small time
business owners as they do not have to invest in expensive electronic registers. Virtual PoS systems use
web-based applications to process payments