It has already been stated that commerce consists of trade and auxiliaries to trade. Auxiliaries or aids to trade refer to the activities related to the buying and selling of goods and services. These auxiliaries to trade are also known as business services or facilities. These services are essential and indispensable for the smooth flow of trade and industry. The examples of business services are Banking, insurance, transport, Warehousing, Advertisement, and communication.
Nature of Business Services
- Intangibility: Cannot be seen, touched or smelled. Just can only be felt, yet their benefits can be availed of e.g. Treatment by a doctor.
- Inconsistency: Different customers have different demands & expectation.e.g. Mobile services/Beauty Parlour.
- In Separability: Production and consumption are performed simultaneously. For e.g. ATM may replace clerk but the presence of the customer is a must.
- Inventory Loss: Services cannot be stored for future use or performed earlier to be consumed at a later date. e.g. underutilized capacity of hotels and airlines during slack demand cannot be stored for the future when there will be a peak demand.
- Involvement: Participation of the customer in the service delivery is a must e.g. A customer can get the service modified according to a specific requirement.
Type of Services
- Social Services: Provided voluntarily to achieve certain goals e.g. healthcare and education services provided by NGOs.
- Personal Services: Services which are experienced differently by different customers. e.g. tourism, restaurants etc.
- Business Services: Services used by business enterprises to conduct their activities smoothly. e.g. Banking, Insurance, communication, Warehousing, and transportation.
- Fixed Deposit Account: Money is deposited in the account for a fixed period is called as Fixed Deposit account. After expiry of the specified period, a person can claim his money from the bank. Usually, the rate of interest is maximum in this account. The longer the period of deposit, the higher will be the rate of interest on the deposit.
- Current Deposit Account: Current deposit Accounts are opened by a businessman. The account holder can deposit and Withdraw money. Whenever desired. As the deposit is repayable on demand, it is also known as a demand deposit. Withdrawals are always made by cheque. No interest is paid on current accounts. Rather charges are taken by the bank for services rendered by it.
- Saving Deposit Account: The aim of a saving account is to mobilize savings of the public. A person can open this account by depositing a small sum of money. He can withdraw money from his account and make additional deposits at will. Account holder also gets interested on his deposit. In this account, though the rate of interest is lower than the rate of interest on a fixed deposit account.
- Recurring Deposit Account: The aim of recurring deposit is to encourage regular savings by the people. A depositor can deposit a fixed amount, say Rs. 100 every month for a fixed period. The amount together with interest is repaid on maturity. The interest rate on this account is higher than that on saving deposits.
- Multiple Option Deposit Account: It is a type of saving Bank A/c in which deposit in excess of a particular limit gets automatically transferred into fixed Deposit. On the other hand, in case adequate fund is not available in our saving Bank Account so, as to honour a cheque that we have issued the required amount gets automatically transferred from fixed deposit to the saving bank account. Therefore, the account holder has twin benefits from this amount (i) he can earn more interest and (ii) It lowers the risk of dishonouring a cheque.
- Term Loans: These loans are provided by the banks to their customers for a fixed period to purchases Machinery. Truck. Scooter. House etc. The borrowers repay the loans in Monthly/Quarterly/Half Yearly/Annual instalments.
- Bank Overdraft: The customer who maintains a current account with the bank, takes permission from the bank to withdraw more money than deposited in his account. The extra amount withdrawn is called overdraft. This facility is available to trustworthy customers for a small period. This facility is usually given against the security of some assets or on the personal security of the customer. Interest is charged on the actual amount overdrawn by the customer.
- Cash Credit: Under this arrangement, the bank advances cash loan up to a specified limit against current assets and other securities. The bank opens an account in the name of the borrower and allows him to withdraw the borrowed money from time to time subject to the sanctioned limit. Interest is charged on the amount actually withdraw.
- Discounting of Bill of Exchange: Under this, a bank gives money to its customers on the security of a bill of exchange before the expiry of the bill in ease of customers needs it. For this service bank charges discount for the remaining period of the bill.
- As an agent of its customers a commercial bank provides the following services:
- Collecting bills of exchange, promissory notes, and cheques.
- Collecting dividends, interest etc.
- Buying and selling shares, debentures and other securities.
- Payment of interest, insurance premium etc.
- Transferring funds from one branch to another and from one place to another.
- Acting as an agent of representative while dealing with other banks and financial institutions. A Commercial bank performs the above functions on behalf of and as per the instructions of its customers.
- Providing lockers for safe custody of jewellery and other valuables of customers.
- Giving references about the financial position of customers.
- Providing information to a customer about the creditworthiness of other customers.
- Supplying various types of trade information useful to the customer.
- Issuing letter of credit, pay orders, bank draft, credit cards and traveller’s cheques to customers.
- Underwriting issues of shares and debentures.
- Providing foreign exchange to importers and travellers going abroad.
Electronic Banking Services/E-Banking
- Electronic. Fund Transfer: Under it, a bank transfers wages and salaries directly from the company s account to the accounts of employees of the company. The other examples of EFTs are online payment of electricity bill, water bill, insurance premium, house tax etc.
- Automatic Teller Machines: (ATMs) ATM is an automatic machine with the help of which money can be withdrawn or deposited by inserting the card and entering personal Identity Number (PIN). This machine operates for all the 24 hours.
- Debit Card: A Debit Card is issued to customers in lieu of his money deposited in the bank. The customers can make immediate payment of goods purchased or services obtained on the basis of his debit card provided the terminal facility is available with the seller.
- Credit Card: A. bank issues a credit card to those of its customers who enjoy a good reputation. This is a sort of overdraft facility. With the help of this card, the holder can buy goods or obtain services up to a certain amount even without having sufficient deposit in their bank accounts.
- TeleBanking: Under this facility, a customer can get information about the account balance or any other information about the latest transactions on the telephone.
- Core Banking Solution Centralized Banking Solution: In this system customer by opening a bank account in one branch (which has CBS facility) can operate the same account in all CBS branches of the same bank anywhere across the country. It is immaterial with which branch of the bank the customer deals with when he/she is a CBS branch customer.
- National Electronic Fund Transfer: NEFT refers to a nationwide system that facilitates individuals, firms and companies to electronically transfer funds from any branch to any individual, firm or company having an account with any other bank branch in the country. NEFT settles transactions in batches. The settlement takes place at a particular point of time, for example, NEFT settlement takes place 6 times a day during the weekdays (9.30am, 10.30 am, 12.00 noon, 1.00 pm. 3.00 pm & 4.00pm) and 3 times during Saturday 9.30 am, 10.30 am and 12.00 noon) Any transaction initiated after a designated settlement time is settled on the next fixed settlement time.
- Real Time Gross Settlement: RTGS refers to a funds transfer system where the transfer of funds takes place from one bank to another on a Real-time and on Gross basis. Settlement in Real-time means transactions is settled as soon as they are processed and are not subject to any waiting period. The gross settlement means the transaction is settled on one to one basis without bunching or netting with any other transaction. This is the fastest possible money transfer system through the banking channel. The RTGS service for customers is available from 9.00 am to 3.00 pm on weekdays and from 9.00 am to 12.00 noon on Saturdays. The basic difference between RTGS and NEFT is that while RTGS transactions are processed continuously, NEFT settles transactions in batches.
- E-Banking provides 24 hours a day X 365 days a year services to the customers.
- Customers can make transactions from office or house or while travelling via mobile telephone.
- There is greater customer satisfaction through E-banking as it offers unlimited access and great security as they can avoid travelling with cash.
- E-Banking lowers the transaction cost.
- Load on branches can be reduced by establishing a centralized database.
- E-Banking provides a competitive advantage to the bank, adds value to the banking relationship.
Meaning of Insurance
- Utmost Good Faith: Insurance contracts are based on mutual trust and confidence between the insurer and the insured. It is a condition of every insurance contract that both the parties i.e.insurer and the insured must disclose every material fact and information related to the insurance contract to each other.
- Insurable Interest: It means some pecuniary interest in the subject matter of an insurance contract. The insured must have an insurable interest in the subject matter of insurance i.e., life or property insured the insured will have to incur a loss due to this damage and insured will be benefitted if full security is being provided. A businessman has an insurable interest in his house, stock, his own life and that of his wife, children etc.
- Indemnity: Principle of indemnity applies to all contracts except the contract of life insurance because estimation regarding the loss of life cannot be made. The objective of the contract of insurance is to compensate to the insured for the actual loss he has incurred. These contracts ‘provide security from loss and no profit can be made out of these contracts.
- Proximate Cause: The insurance company will compensate for the loss incurred by the insured due to the reasons mentioned in the insurance policy. But if losses are incurred due to reasons not mentioned in the insurance policy than the principle of proximate cause or the nearest cause is followed.
- Subrogation: This principle applies to all insurance contracts which are contracts of indemnity. As per this principle, when any insurance company compensates the insured for loss of any of his property, then all rights related to that property automatically gets transferred to the insurance company.
- Contribution: According to this principle if a person has taken more than one insurance policy for the same risk then all the insurers will contribute the amount of loss in proportion to the amount assured by each of them and compensate for the actual amount of loss because he has no right to recover more than the full amount of his actual loss.
- Mitigation: According to this principle the insured must take reasonable steps to minimize the loss or damage to the insured property otherwise the claim from the insurance company may be lost.
The Concept of Life Insurance
- Whole Life Policy: Under this policy, the sum insured is not payable earlier than the death of the insured. The sum becomes payable to the heir of the deceased.
- Endowment Life Insurance Policy: Under this policy the insures undertakes to pay the assured to his heirs or nominees a specified summon the attainment of a particular age or on his death whichever is earlier.
- Joint Life Policy: It involves the insurance of two or more lives simultaneously. The policy money is payable on the death of anyone olives assured and the assured sum will be payable to the survivor or survivors.
- Annuity Policy: This policy is one under which amount is payable in monthly, quarterly, half yearly or annual instalments after the assured attains a certain age. This is useful to those who prefer a regular income after a certain age.
- Children’s Endowment Policy: This policy is taken for the purpose of education of children or to meet marriage expenses. The insurer agrees to pay an assured sum when the child attains a certain age.
- Utmost Good Faith
- Contract of Indemnity
- Insurable Interest in the Subject matter.
- Subject to the doctrine of causa proximity.
- It is a contract for a year. It generally comes to an end at the expiry of the year and may be renewed.
- Financial Services: They provide postal banking facilities to the general public and mobilize their savings through the following saving schemes like public provident fund (PPF), Kisan Vikas Patra, National Saving Certificate, Recurring Deposit Scheme and Money Order facility.
- Mail Services: The mail services offered by post offices includes the transmission of messages through postcards, Inland letters, envelops etc. The various mail services all:
- UPC (under postal certificate): When ordinary letters are posted the post office does not issue any receipt. However, if the sender wants to have proof then a certificate can be obtained from the post office on payment of prescribed fee. This paper now serves as a evidence of posting the letters.
- Registered Post: Sometimes we want to ensure that our mail is definitely delivered to the addressee otherwise it should come back to us. In such situations, the post office offers registered post facility which serves as a proof that mail has been posted.
- Parcel: Transmission of articles from one place to another in the form of parcels is known as parcel post. Postal charges vary according to the weight of the parcels.
- Greetings Post: Greetings can be sent through post offices to people at different places.
- Media Post: Cooperates can advertise their brands through postcards, envelops etc.
- Speed Post: It allows speedy transmission of articles (within 24 hours) to people in specified cities.
- e-bill post: The post offices collect payment of bills on behalf of BSNL and other organizations.
- Courier Services: Letters, documents, parcels etc. can be sent through the courier service. It is a private service the employees work with more responsibility.
- Cellular mobile services: a cordless mobile communication device including voice and non-voice messages, data services and PCO services.
- Radio Paging Services means of transmitting information to persons even when they are mobile.
- Fixed Line Services includes voice and non-voice messages and data services to establish linkage for long distance traffic.
- Cable services Linkages and switched services within a licensed area of operation to operate media services which are essentially oneway entertainment related services.
- VSAT Service (Very Small Aperture Terminal) is a Satellite-based communication service. It offers government and business agencies a highly flexible and reliable communication solution in both urban and rural areas.
- DTH Services (Direct to Home) a Satellite-based media services provided by cellular companies with the help of small dish antenna and a setup box.