Business Studies 6 Marks Question

(b) Benefits to customers: (i) Continuous service. (ii) Convenience. (iii) Great security

1. Issue of Bank Draft A bank draft is a type of cheque which is drawn by a bank either on its own branch or on another bank. In order to remit money through a bank draft, a person first obtains the bank draft from the bank, fills in a form and pays the amount of the draft alongwith the prescribed commission. He, then sends the bank draft to the receiver by post. The receiver then deposits it in his bank. The bank collects the payment from the concerned bank and credits it to the customer's account.
2. Pay Order or Banker's Cheque It means the bank Von draft which is payable within the city or town. It may be called as a local bank draft. Banks issue pay orders for local use and issue bank drafts for outstations. The commission charged for a pay order is lesser as compared to bank draft.
3. Real Time Gross Settlement (RTGS) It is a fund transfer system under which transfer of funds takes place from one bank to another on a Real Time and Gross basis. Settlement on 'Real Time' means that there is no waiting period and 'Gross' settlement means the transaction is made on one to one basis. It is the fastest possible system for transfer of money.
4. National Electronic Funds Transfer (NEFT) It is a countrywide system by which an individual, firm or company can electronically transfer funds from any bank branch to another individual, firm or company having an account with any other bank branch in the country.
5. Other Services Banks also provide e-banking services to its customers.

1. Banking Services They are those services which facilitate finance to the business firm or to any household.
2. Insurance Services They are those services in which an insurer after charging certain fee to compensates for the risk of the businessman or an individual.
3. Transport Services They are the services that play a significant role as they facilitate the transportation of raw material, finished goods, human resources, etc from one place to the other. Road, rail, airways and waterways are the modes of transport services
4. Warehousing It means to store the material safely till consumption. This concept was introduced to facilitate the storage of raw material or finished goods until the time they are required for consumption.
5. Communication It means a process or service of exchanging message between two or more people. It facilitates enquiry of products, orders, and complaints and suggestions.

• Storage: Warehouses facilitate the storage of goods and raw materials that are not required immediately for sale or for manufacturing, and protect them from spoilage or damage.
• Value-added services: They perform value-added services, such as grading the quality of products, packaging and labelling, for producers.
• Financing: The owner of the goods or raw materials stored in a warehouse can use the warehouse receipt as a security for borrowing money from banks or other financial institutions.

• UPI apps: UPI or unified payment interface is a payment mode which is used to make fund transfers through the mobile app. You can transfer funds between two accounts using UPI apps. You will have to register for mobile banking to use UPI apps. Currently, this service is only available for android phone users. Hence you can use UPI only when you have an android phone. You need to download a UPI app and create a VPA or UPI ID. There are too many good UPI apps available such as BHIM, SBI UPI, HDFC UPI, iMobile, PhonePe etc. It is not mandatory to use the UPI app from your bank to enjoy UPI service. You can download and use any UPI app. UPI apps are a faster solution to send money using VPA or even IFSC and account number. But they have some limitations also. If you do not have an android phone you cannot use UPI app. Lack of stable internet connection can also cause trouble for these apps.
• AEPS: AEPS is an Aadhaar based digital payment mode. The term AEPS stands for Aadhaar Enabled Payment Service. Customer needs only his or her Aadhaar number to pay to any merchant. AEPS allows bank to bank transactions. It means the money you pay will be deducted from your account and credited to the payee's account directly. You need to link your Aadhaar number to your bank account to use AEPS. Unlike Debit cards and USSD, AEPS does not have any charges on transactions. You can use AEPS with the help of PoS (Point of sale) machines. You can withdraw or deposit cash, send money to another Aadhar linked account with it. The good thing about AEPS is that it doesn't need your signature, bank account details or any password. It uses your fingerprint as a password. No one can forge your fingerprints, thus it is the most secure digital payment mode. USSD: USSD banking or *99# Banking is a mobile banking based digital payment mode. You do not need to have a smartphone or internet connection to use USSD banking. You can easily use it with any normal feature phone. USSD banking is as easy as checking your mobile balance. You can use this service for many financial and non-financial operations such as checking balance, sending money, changing MPIN and getting MMID. The *99# code works as a bridge between your telecom operator's server and your bank's server. It uses your registered mobile number to connect with your bank account. Hence, dial *99# with your registered number only. USSD banking has a transaction limit of 5,000 per day per customer. RBI has also set a maximum charge of 2.5 per operation.
• Cards: Cards are provided by banks to their accountholders. These have been the most used digital payment modes till now. Many of us use cards for transferring funds and making digital payments. Credit cards, debit cards and prepaid cards are the main types of cards. You can also use Rupay debit card for digital payments.

1. Credit cards are issued by banks and some other entities authorized by RBI. These cards give you the ability to withdraw or use extra money. Credit cards are used for domestic as well as international payments.
2. Debit cards are issued by the bank where you have your account. You can use these cards for the money in your account. The payments you make with these cards debited from your account and credited immediately to the payee's account. You can use these cards to make payments to one bank account to another.
3. Prepaid cards are another type of cards which you use to pay digitally. You must have to recharge these cards before using just like prepaid SIM cards.

• E-Wallets: E-wallet or mobile wallet is the digital version of your physical wallet with more functionality. You can keep your money in an E-wallet and use it when needed. Use the E-wallets to recharge your phone, pay at various places and send money to your friends. If you have a smartphone and a stable internet connection, you can use E-wallets to make payments. These E-Wallets also give additional cash back offers. Some of the most used E-wallets are State bank buddy, ICICI Pockets, Freecharge, Paytm etc.

1. Business services (including professionals and computers)
2. Communication services
3. Construction and related engineering services
4. Distribution services
5. Educational services
6. Environmental services
7. Financial services (insurance and banking)
8. Health related and social services
9. Tourism and travel related services
10. Recreational, cultural and sporting services
11. Transport services
12. Other services (not included elsewhere)

1. E-banking facilitates digital payments and promotes transparency in financial statements.
2. E-banking provides 24 hours, 365 days a year services to the customers of the bank.
3. Customers can make some of the permitted transactions from office or house or while travelling via mobile telephone.
4. It inculcates a sense of financial discipline by recording each and every transaction.
5. Greater customer satisfaction by offering unlimited access to the bank, not limited by the walls of the branch and less risk and greater security to the customer as they can avoid travelling with cash.

1. Easy and convenient: Digital payments are easy and convenient. You do not need to take loads of cash with you. All you need is your mobile phone or Aadhaar number or a card to pay. UPI apps and E-Wallets made digital payments easier.
2. Pay or send money from anywhere: With digital payment modes, you can pay from anywhere anytime. Suppose your close friend's mother fell ill at night. He called you at midnight and asked some money. Don't worry, you can send money to your friend using digital payment modes such as UPI apps, USSD or E-Wallets.
3. Discounts from taxes: Government has announced many discounts to encourage digital payments. If you use digital modes to make a payment up to 2000, you get full exemption from service tax. You also get 0.75% discounts on fuels and upto 10% discount on insurance premiums of government insurers.
4. Written record: You often forget to note down your cash spendings. Or even if you note, it takes a lot of time. But you do not need to note your spendings every time with digital payments. These are automatically recorded in your passbook or inside your E-Wallet app. This helps to maintain your record, track your spendings and budget planning.
5. Less Risk: Digital payments have less risk if you use them wisely. If you lose your mobile phone or debit/credit card or Aadhar card you don't have to worry a lot. No one can use your money without MPIN, PIN or your fingerprint in the case of Aadhar. But it is advised that you should get your card blocked if you lost it. Also call the helpline of your E-wallet to suspend the wallet account to prevent anyone from using your wallet money.

1. Difficult for a non-technical person: As most of the digital payment modes are based on mobile phone, the internet and cards, these modes are somewhat difficult for non-technical persons such as farmers, workers etc.
2. The risk of data theft: There is a big risk of data theft associated with the digital payment. Hackers can hack the servers of the bank or the E-Wallet you are using and easily get your personal information. They can use this information to steal money from your account.
3. Overspending: You keep limited cash in your physical wallet. Hence, you think twice before buying anything. But if you use digital payment modes, you have all your money with you always. This can result in overspending.

1. Banking Cards: These cards have been the most used digital payment modes till now. Credit cards, debit cards and prepaid cards are the main types of cards with authentication of PIN and OTP for severe payments. RuPay, Visa and Master cards are some of the example of card payment systems. Banking cards can be used for online purchases, in digital payment apps, point of sale machines, online transactions, etc
2. Unstructured Supplementary Service Data: (USSD) The innovative payment service *99# works on USSD channel. This method can be used to carry out mobile banking transactions without the use of mobile internet data. This service can be used to initiate fund transfer and to make balance queries.
3. Aadhaar Enabled Payment System: (AEPS) It is a way to make financial transactions from the bank account with the help of your biometric authentication. AEPS can be used for all banking transactions such as balance enquiry, cash withdrawal, cash deposit, payment transactions, etc.
4. Unified Payment Interface: (UPI) UPI android apps enable all bank account holders to send and receive money from their smart phones without the need to enter bank account information.
5. Mobile Wallet: It is a virtual wallet that stores payment card information on a mobile device. Mobile wallets are convenient way for a user to make in-store payments and can be used at merchants listed with mobile wallet service provider.
6. Point of Sale: (PoS) Terminals It refers to those machines that are installed at all stores where purchases are made by customers using credit/debit cards. It is usually a hand held device that reads banking cards.
7. Internet Banking: It refers to the process of carrying out banking transactions online. Internet banking is usually used to make online fund transfers via NEFT (National Electronic Fund Transfer), RTGS (Real Time Gross Settlement) or IMPS (Immediate Payment Services).
8. Mobile Banking: Mobile banking is referred to the process of carrying out banking transactions through a smartphone. The scope of mobile Subanking is only expanding with the introduction of many mobile wallets, digital payment apps, UPI and own apps of banks. Ambas
9. Bharat Interface for Money: (BHIM) App It is a mobile app developed by National Payments Corporation of India (NPCI), based on Unified Payment Interface (UPI). The app supports all Indian banks through immediate payment service infrastructure and allows the user to instantly transfer money between bank accounts of any two parties.

1. Whole life Policy: Under this policy premiums are paid throughout life and the sum insured becomes payable only at the death of the insured. The policy remains in force throughout the life of the assured and he continues to pay the premium till his death. This is the cheapest policy as the premium till his death. This is the cheapest policy as the premium charged is the lowest under this policy. This is also known as 'ordinary life policy'. This policy is suitable to persons who want to provide for payment of estate duty, make bequeathments for charitable purposes and to provide for their families after their death.
2. Children's Endowment Policy: This policy is taken by the person for his or her children to meet the expenses of education or marriage. The agreement states that a certain sum of money will be paid by the insurer when the children attain a particular age. There will be no need of paying premium if the person entering into the contract dies before maturity.
3. Endowment Policy: It runs only for a limited period or up to a particular age. Under this policy the sum assured becomes payable if the assured reaches a particular age or after the expiry of a fixed period called the endowment period or at the death of the assured whichever is earlier. The premium under this policy is to be paid up to the maturity of the policy, i.e., the time when the policy becomes payable. Premium is naturally a little higher in the case of this policy than the whole life policy. This is a very popular policy these days as it serves the dual purpose of family and old age pension.
4. Double Endowment Policy: Under this policy the insurer agrees to pay to the assured double the amount of the insured sum if he lives on beyond the date of maturity of the policy. This policy is suitable for persons with physical disability who are otherwise not acceptable for other classes of assurance at the normal tabular rates. Premiums are to be paid for a selected term of years or until death, if earlier.
5. Joint Life Policy: This policy covers the risk on two lives and is generally available to partners in business. Policies are however, issued on the lives of husband and wife under specified circumstances. Sum assured becomes payable at the end of the selected term or on the death of either of the two lives assured, if earlier.
6. Fixed term (marriage) Endowment Policy and Education Annuity Policy: It is a policy suitable for making provisions for the marriage or education of children. Premiums are payable for a selected term or till prior death. The benefits are payable for selected term or till prior death. The benefits are payable only at the end of selected term. In case of the marriage endowment, the sum assured is paid in lump sum, but in case of the educational annuity, it is paid in equal half-yearly installments over a period of five years.
7. Annuities: It is a policy under which the insured amount is payable to the assured by monthly or annual installments after he attains a certain age. The assured may pay the premium regularly over a certain period or he may pay the premium regularly over a certain period or he may pay a lump sum of money at the outset. These policies are useful to persons who wish to provide a regular income for themselves and their dependants.

1. Cellular mobile services: These are all types of mobile telecom services including voice and non-voice messages, data services and PCO services utilising any type of network equipment within their service area. They can also provide direct inter connectivity with any other type of telecom service provider.
2. Fixed line services: These are all types of fixed services including voice and non-voice messages and data services to establish linkages for long distance traffic. These utilise any type of network equipment primarily connected through fiber optic cables laid across the length and breadth of the country. The also provide inter connectivity with other types of telecom services.
3. Cable services: These are linkages and switched services within a licensed area of operation to operate media services, which are essentially one-way entertainment related services. The two-way communication including voice, data and information services through cable network would emerge significantly in the future. Offering services through the cable network would be similar to providing fixed services.
4. VSAT services: VSAT (Very Small Aperture Terminal) is a satellite-based communications service. It offers businesses and government agencies a highly flexible and reliable communication solution in both urban and rural areas. Compared to land-based services, VSAT offers the assurance of reliable and uninterrupted service that is equal to or better than land-based services. It can be used to provide innovative applications such as tele-medicine, newspapers-on-line, market rates and tele-education even in the most remote areas of our country.
5. DTH services: DTH (Direct to Home) is again a satellite-based media services provided by cellular companies. One can receive media services directly through a satellite with the help of a small dish antenna and a set top box. The service provider of DTH services provides a bouquet of multiple channels. It can be viewed on our television without being dependent on the services provided by the cable network services provider.

1. Acceptance of deposits: Banks accept various types of deposits from the public such as savings account deposit, current account deposit and fixed account deposit, and pay interest on them. They are indebted to repay the depositor the amount deposited by him or her.
2. Lending of funds: Banks grant loans and advances on the basis of the total deposits available with them. These advances can be in the form of overdrafts, discounted trade bills, cash or consumer credits, etc. The interest charged on these loans is a major source of profits for banks.
3. Extension of Cheque facility: Cheques drawn on other banks are also collected by banks, and thus they act as a clearing house. Cheques are mainly of two types ,bearer cheques (encashable immediately at bank counters) and crossed cheques (only deposited in the payees' accounts).
4. Remittance of funds: Banks help in transferring the funds of customers from one place to another. These transfers can be done in the form of bank drafts and pay orders at nominal commission charges.
5. Provision of allied services: In addition to other functions, banks also provide services such as locker facility, underwriting services and bill payments. They also perform functions such as buying and selling of shares and debentures on behalf of their customers.

1. Principle of Utmost Good Faith: Under this insurance, contract both the parties should have faith over each other. As a client it is the duty of the insured to disclose all the facts to the insurance company. Any fraud or misrepresentation of facts can result into cancellation of the contract.
2. Principle of Insurable interest: Under this principle of insurance, the insured must have interest in the subject matter of the insurance. Absence of insurance makes the contract null and void. If there is no insurable interest, an insurance company will not issue a policy.
   An insurable interest must exist at the time of the purchase of the insurance. For example, a creditor has an insurable interest in the life of a debtor, A person is considered to have an unlimited interest in the life of their spouse etc.
3. Principle of Indemnity: Indemnity means security or compensation against loss or damage. The principle of indemnity is such principle of insurance stating that an insured may not be compensated by the insurance company in an amount exceeding the insured’s economic loss.
   In this type of insurance the insured would be provided compensation with the amount equivalent to the actual loss and not the amount exceeding the loss.
   This is a regulatory principle. This principle is observed more strictly in property insurance than in life insurance.
   The purpose of this principle is to set back the insured to the same financial position that existed before the loss or damage occurred.
4. Principle of Subrogation: The principle of subrogation enables the insured to claim the amount from the third party responsible for the loss. It allows the insurer to pursue legal methods to recover the amount of loss. For example, if you get injured in a road accident, due to reckless driving of a third party, the insurance company will compensate your loss and will also sue the third party to recover the money paid as claim.
5. Principle of Contribution: If the same subject matter, except life is insured by more than one insurers, then the actual loss will be shared by all the insurers.
6. Principle of Mitigation: If means that the insured should try to minimise the loss of the subject matter of the insurer even if it is insured.
7. Principle of Proximate Cause: Proximate cause literally means the ‘nearest cause’ or ‘direct cause’. This principle is applicable when the loss is the result of two or more causes. The proximate cause means; the most dominant and most effective cause of loss is considered. This principle is applicable when there are series of causes of damage or loss.

1. Intangibility Services are intangible, i.e., they cannot be touched. They can only be experienced and hence the quality of the service cannot be determined before consumption. Therefore, the service providers consciously work on creating a desired service so that the customer has a favorable experience, e.g., service in a restaurant should be a favorable experience for customer to visit again.
2. Inconsistency Services have to be performed exclusively each time according to different consumer demands as there is no standard tangible product on offer. Hence inconsistency is an important characteristic of services. Service providers need to modify their offer to closely meet the requirements of the customers, e.g., services provided by nationalized banks are quite different from the banking services provided by private banks.
3. Inseparability Activities of production and consumption are performed simultaneously in case of services which makes the production and consumption of services seem to be inseparable as services have to be consumed as and when they are produced, e.g., we cannot separate the medical services provided by a doctor.
4. Absence of Inventory Services are intangible and perishable and hence cannot be stored for future use. This implies that the supply needs to be managed according to demand as the service has to be performed as and when the customer asks for it. e.g., a medicine, can be stored but the medical care will be experienced only when the doctor provides it.
5. Involvement Participation of the customer in the service delivery process is an important characteristic of services as the customer has the opportunity to get the services modified according to his/ her specific requirements, e.g., cinema halls are providing services to watch movie but the customer has to visit to the hall to experience the movie in cinema hall.

• Life Insurance: It is a contract between the insurer and the insured in which the insurer agrees to pay a certain pre-specified amount to the insured on the occurrence of death of the assured or on maturity of the insurance contract, whichever comes earlier. That is, in case the insured dies before the maturity of the contract, his or her family is given the assured amount. However, if the insured survives till the maturity of the contract, then he or she is given the specified sum of money. In return for this assurance, the insured pays a fixed amount as premium to the insurer. The need for a life insurance policy arises because of the uncertainties of life.
• Fire Insurance: Insurance contracts that protect the insured against the loss or damage caused by fire during a given period are called fire insurance contracts. Under a fire insurance contract, the insurer agrees to compensate the insured for the loss or damage to the insured property caused by fire, against a payment of a fixed premium. The maximum compensation which the insurer is liable to pay is pre-specified in the contact, along with the conditions under which the contract is enforceable.
• Marine Insurance: A marine insurance contract protects the owner of a ship or cargo against complete or partial loss or damage caused to the ship or cargo at sea. It provides protection against the perils of the sea such as collision of the ship with a rock, attack on the ship by enemies and pirates, and damage caused by fire. The insured pays a certain amount as premium to the insurer.

1. Greeting post- A range of delightful greeting cards for every occasion.
2. Media post- An innovative and effective vehicle for Indian corporates to advertise their brand through postcards, envelopes, aerograms, telegrams, and also through letterboxes.
3. Direct post is for direct advertising. It can be both addressed as well as unaddressed.
4. International Money Transfer through collaboration with Western Union financial services, USA, which enables remittance of money from 185 countries to India.
5. Passport facilities- A unique partnership with the ministry of external affairs for facilitating passport application.
6. Speed Post- It has over 1000 destinations in India and links with 97 major countries across the globe.
7. E-bill post is the latest offering of the department to collect bill payment across the counter for BSNL and Bharti Airtel.

• Consolidation: In this function the warehouse receives and consolidates, materials/ goods from different production plants and dispatches the same to a particular customer on a single transportation shipment.
• Break the bulk: The warehouse performs the function of dividing the bulk quantity of goods received from the production plants into smaller quantities. These smaller quantities are then transported according to the requirements of clients to their places of business.
• Stock piling: The next function of warehousing is the seasonal storage of goods to select businesses. Goods or raw materials, which are not required immediately for sale or manufacturing, are stored in warehouses. They are made available to business depending on customers’ demand. Agricultural products which are harvested at specific times with subsequent consumption throughout the year also need to be stored and released in lots.
• Value added services: Certain value added services are also provided by the warehouses, such as in transit mixing, packaging and labelling. Goods sometimes need to be opened and repackaged and labelled again at the time of inspection by prospective buyers. Grading according to quantity and dividing goods in smaller lots is another function.
• Price stablisation: By adjusting the supply of goods with the demand situation, warehousing performs the function of stabilising prices. Thus, prices are controlled when supply is increasing and demand is slack and vice versa.
• Financing: Warehouse owners advance money to the owners on security of goods and further supply goods on credit terms to customers.