Class 12 OCM Chapter 4: Business Services

Key concepts: Business Services

Features of services

Services are intangible, inseparable from the provider, inconsistent in quality, perishable, non-transferable in ownership and need the customer to take part.

Types of banks

Central bank (RBI), commercial, co-operative, development, exchange, regional rural, savings, investment and specialised banks (EXIM, SIDBI, NABARD). Newer models: small finance and payment banks.

Functions of commercial banks

Primary: accepting deposits (time and demand) and granting loans and advances. Secondary: agency functions (e.g. fund transfer, portfolio management) and utility functions (e.g. lockers, drafts).

E-banking

Computerised banking that lets customers transact without visiting a branch: ATM, credit and debit cards, RTGS, NEFT, net and mobile banking and IMPS.

Principles of insurance

Seven principles: utmost good faith, insurable interest, indemnity, subrogation, contribution, mitigation of loss and causa proxima (nearest cause of loss).

Types of insurance

Life insurance pays on death or maturity. Marine insurance covers ship, cargo and freight against sea perils. Fire insurance indemnifies loss of property due to fire. Each has several kinds of policies.

Modes of transport

Road, rail, air, water, monorail and metro, ropeways and pipeline. Each has its own advantages and limits in speed, cost, carrying capacity, safety and door to door service.

Warehousing

Storage and preservation of goods from production to consumption. It gives storage, price stabilization, risk bearing, financing, grading, packing, time and place utility. Types include private, public, bonded and cold storage.

Quick revision: important points

• Service features: intangibility, inseparability, inconsistency, perishability, non-transferability, consumer participation.
• RRB capital: Central Govt 50%, State Govt 15%, sponsor bank 35%. RTGS minimum is Rs 2 lakh; NEFT is deferred net.
• Indemnity does not apply to life insurance. Compensation is the lesser of the amount insured and the actual loss.
• Life policies: whole life, endowment, term, annuity, money-back, child, retirement, ULIP.
• Warehouses: private, public, bonded, duty paid, government, co-operative, cold storage.
• Postal services: mail, specialised, money remittance, retail. Modern means: courier, internet, email.

Practice MCQs with answers

1. The vacant seats of a morning flight cannot be used for the afternoon flight of the same airline. Which feature of services does this show?

   1. Intangibility
   2. Inseparability
   3. Perishability
   4. Inconsistency
   Show answer

   Answer: C. Perishability
   Services cannot be stored for later use, so unused capacity is lost. This is perishability.

2. The same restaurant gives two customers different experiences even though the provider is the same. This is called:

   1. Non-transferability
   2. Inconsistency
   3. Intangibility
   4. Consumer participation
   Show answer

   Answer: B. Inconsistency
   Services are heterogeneous and cannot be perfectly standardised, so quality can differ from time to time.

3. Which function is performed by the central bank (RBI) and not by commercial banks?

   1. Accepting fixed deposits from the public
   2. Granting overdraft to traders
   3. Providing locker facilities to customers
   4. Issuing currency notes
   Show answer

   Answer: D. Issuing currency notes
   The RBI frames monetary policy, issues currency notes and acts as banker to the Government and to other banks.

4. Which co-operative credit institution works at village level?

   1. Primary credit society
   2. District central co-operative bank
   3. State co-operative bank
   4. Regional rural bank
   Show answer

   Answer: A. Primary credit society
   Co-operative banks work at three levels: primary credit societies (village), district central banks and the state co-operative bank.

5. Which of these is NOT allowed for a payment bank?

   1. Remittance services
   2. Mobile banking
   3. Issuing loans and credit cards
   4. Issuing ATM cards
   Show answer

   Answer: C. Issuing loans and credit cards
   A payment bank can do most banking functions but cannot issue loans or credit cards, and can accept demand deposits only up to Rs 1 lakh.

All Class 12 OCM chapters

• Chapter 1: Principles of Management
• Chapter 2: Functions of Management
• Chapter 3: Entrepreneurship Development
• Chapter 4: Business Services
• Chapter 5: Emerging Modes of Business
• Chapter 6: Social Responsibilities of Business
• Chapter 7: Consumer Protection
• Chapter 8: Marketing

Class 12 OCM notes: all chapters