Business services

• Business services - those services which are used by business enterprises for the conduct of their operation/activities. Eg: banking, insurance, warehousing etc..
• How is a bank useful to the economy?

  • A bank accepts money on deposits, repayable on demand and also earns profit by lending money.
  • A bank stimulates economic activity in the market by dealing in money.
  • It mobilizes the savings of people and makes funds available to business financing their capital and revenue expenditure.
  • It also provides financial services for a price such as discount, interest, commission etc..
• What are the different types of bank accounts?

  1. Savings a/c
  2. Current a/c
  3. Recurring deposit a/c
  4. Fixed deposit a/c
  5. Multiple option deposit a/c
• Savings a/c:

  • Meant for individuals who want to save some amount of money from their income.
  • Customers can deposit money with ease and withdraw through a check or slip as and when they need it.
  • The amount in the savings a/c is known as ’demand liability’ of the bank.
• Current a/c:

  • Opened by businessman by making an initial deposit of 5000 Rs.
  • There is no restrictions on the amount deposited or the number of withdrawals made.
  • Also known as active and running a/c.
• Recurring deposit a/c:

  • The a/c holder is required to hold a specified sum of money every month.
  • The time range may vary from 12 months - 10 years.
  • Also known as cumulative time deposits.
• Fixed deposit a/c:

  • A lump sum money is deposited for a long period of time.
  • It can range from 15 days - 5 years.
  • Also known as ‘time deposits’ or ‘long term time‘ deposits.
  • They are repayable after the expiration date of the deposit.

• Multiple option deposit a/c:

  • A combination of savings a/c and fixed deposit a/c.
  • The depositors can enjoy the liquidity of the savings a/c and the rate of interest of the fixed deposit a/c.
  • Standing instructions are given to the bank to convert the balance in the savings a/c to fixed deposit a/c if the time limit to repay the money crosses.
• Internet banking - Any user with a PC and a browser can get connected to the internet and access their bank account and perform virtual banking transactions. They can make avail of the banking services online.
• What are the benefits of e-banking to the customers?

  • Facilitates digital payments and promotes transparency in the financial statements.
  • Provides 24 hours, 365 days in a year services to the customers.
  • Customers can make permitted transactions in the comfort of their homes, offices or even while travelling.
  • Inculcates a sense of financial discipline and security by recording every transaction.
  • Greater customer satisfaction as they have unlimited access to the bank.
• What are the benefits of e-banking to the bank?

  • Provides competitive advantage to the bank.
  • Provides unlimited network to the bank and is not limited on the number of branches. Any user with a PC and internet connection can perform cash withdrawals to satisfy the customers.
  • Helps in reducing the work load of the bank by establishing a centralized database.
• What is insurance?

  Insurance is a contract where one party (insurer) takes responsibility of the risk of the other party (insured) in exchange for an agreed sum of money.
• The agreement made between the insurer and the insured is known as policy.
• Explain the principle of utmost good faith.

  • A contract of insurance is a contract of uberrimae fidei ie, a contract of utmost good faith.
  • Both the insured and the insurer should display good faith between each other.
  • The insured should voluntarily disclose clear and accurate facts, material to the risk being proposed.
  • The insurer should make clear disclosure of the terms and conditions about the contract.
• What is the principle of contribution?

  • If a person takes more than one insurance policy for the same risk, the insurers will contribute for the loss in proportion to the amount assured by them and compensate the insured for the actual amount of loss.
• What is the principle of indemnity?

  • Every fire or marine contract are contracts of indemnity.
  • The insurer undertakes to compensate for the loss caused to the insured due to the damage to the insured property.
  • This is not applicable for life insurance as one cannot estimate the value for a death of a person and compensate for it.
• Explain the principle of subrogation

  • After the insured is compensated for the damage/loss of his/her property, the ownership passes onto the insurer.
  • This is because the insured cannot make any profit by selling damaged property.
• Life insurance - A contract under which the insurance company undertakes to insure the life of a person in exchange for a premium and promises to pay a fixed sum of money on the death of the insured or on the expiry of a specific period of time, whichever is earlier.
• The main elements of a life insurance contract include?

  • Utmost good faith
  • Insurable interest
  • Must have all the essentials like a valid contract
  • Not a contract of indemnity
• Fire insurance - A contract under which the insurer in exchange for premium undertakes to compensate for any loss or damage caused by a fire during the policy period.
• A claim for loss by fire must satisfy the following 2 conditions which are:

  • There must be actual loss, and
  • Fire must be accidental and non - intentional
• The main elements for fire insurance contract are

  • Insurable interest
  • Principle of indemnity
  • Utmost good faith
  • Valid contract
• Marine insurance - A contract under which the insurer undertakes to compensate the insured for complete or partial loss at sea.
• In case of marine insurance, the insurer is known as

  underwriter
• The main elements of a marine insurance contract includes:

  • Indemnity
  • Utmost good faith
  • Insurable interest
  • Causa proxima
  • Valid contract