XI _CHAPTER 4_BUSINESS SERVICES.pdf {BST}
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Aug 30, 2024
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About This Presentation
Notes of BST
Slide Content
XI BUSINESS STUDIES
BUSINESS SERVICES
CHAPTER 4
BUSINESS SERVICES
CHAPTER 4
CONCEPT OF SERVICES
•Services are all those economic activities that are intangible and imply an
interaction to be realisedbetween the service provider and the consumer.
•Services are those separately identifiable, essentially intangible activities
that provides satisfaction of wants, and are not necessarily linked to the
sale of a product or another service.
GOODS
•A good is a physical product capable of being delivered to a purchaser and
involves the transfer of ownership from seller to customer. Goods are also
generally used to refer to commodities or items of all types, except services,
involved in trade or commerce
•Services are all those economic activities that are intangible and imply an
interaction to be realisedbetween the service provider and the consumer.
•Services are those separately identifiable, essentially intangible activities
that provides satisfaction of wants, and are not necessarily linked to the
sale of a product or another service.
GOODS
•A good is a physical product capable of being delivered to a purchaser and
involves the transfer of ownership from seller to customer. Goods are also
generally used to refer to commodities or items of all types, except services,
involved in trade or commerce
DIFFERENTIATION BETWEEN GOODS AND SERVICES
BASIS SERVICES GOODS
Nature An activity or process. e.g., watching a movie in a
cinema hall
A physical object. e.g., video cassette of movie
Type Heterogeneous Homogeneous
Intangibility Intangible e.g., doctor treatment Tangible e.g., medicine
Inconsistency Different customers having different demands
e.g., mobile services
Different customers getting standardised
demands fulfilled. e.g., mobile phones
Inseparability Simultaneous production and consumption. e.g.,
eating ice-cream in a restaurant
Separation of production and consumption.
e.g., purchasing ice cream from a store
Inventory Cannot be kept in stock. e.g., experience of a
train journey
Can be kept in stock. e.g., train journey ticket
Involvement Participation of customers at the time of service
delivery. e.g., self-service in a fast food joint
Involvement at the time of delivery not
possible. e.g., manufacturing a vehicle
BASIS SERVICES GOODS
Nature An activity or process. e.g., watching a movie in a
cinema hall
A physical object. e.g., video cassette of movie
Type Heterogeneous Homogeneous
Intangibility Intangible e.g., doctor treatment Tangible e.g., medicine
Inconsistency Different customers having different demands
e.g., mobile services
Different customers getting standardised
demands fulfilled. e.g., mobile phones
Inseparability Simultaneous production and consumption. e.g.,
eating ice-cream in a restaurant
Separation of production and consumption.
e.g., purchasing ice cream from a store
Inventory Cannot be kept in stock. e.g., experience of a
train journey
Can be kept in stock. e.g., train journey ticket
Involvement Participation of customers at the time of service
delivery. e.g., self-service in a fast food joint
Involvement at the time of delivery not
possible. e.g., manufacturing a vehicle
TYPES OF SERVICES
1. Business Services :Business services are those services which are used by business
enterprises for the conduct of their activities.
Example –Banking, Insurance, Transportation, Warehousing and Communication.
2. Social Services: Social services are those services that are generally provided voluntarily in
pursuit of certain social goals. These social goals may be to improve the standard of
living for weaker sections of society, to provide educational services to their children, or
to provide health care and hygienic conditions in slum areas. These services are usually
provided voluntarily but for some consideration to cover their costs. For example, health
care and education services provided by certain Non-government organisations (NGOs)
and government agencies.
3. Personal Services: Personal services are those services which are experienced differently
by different customers. These services cannot be consistent in nature. They will differ
depending upon the service provider. They will also depend upon customer’s
preferences and demands. For example, tourism, recreational services, restaurants.
1. Business Services :Business services are those services which are used by business
enterprises for the conduct of their activities.
Example –Banking, Insurance, Transportation, Warehousing and Communication.
2. Social Services: Social services are those services that are generally provided voluntarily in
pursuit of certain social goals. These social goals may be to improve the standard of
living for weaker sections of society, to provide educational services to their children, or
to provide health care and hygienic conditions in slum areas. These services are usually
provided voluntarily but for some consideration to cover their costs. For example, health
care and education services provided by certain Non-government organisations (NGOs)
and government agencies.
3. Personal Services: Personal services are those services which are experienced differently
by different customers. These services cannot be consistent in nature. They will differ
depending upon the service provider. They will also depend upon customer’s
preferences and demands. For example, tourism, recreational services, restaurants.
BANKING
•A banking company in India is the one which transacts the business of banking
which means accepting, for the purpose of lending and investment of deposits of
money from the public, repayable on demand or otherwise and withdrawableby
cheques, draft, order or otherwise.
•A bank accepts money on deposits, repayable on demand and also earns a
margin of profit by lending money.
•A bank stimulates economic activity in the market by dealing in money. It
mobilisesthe savings of people and makes funds available to business financing
their capital and revenue expenditure.
•Banks can be classified into the following:
1. Commercial banks
2. Cooperative banks
3. Specialisedbanks
4. Central bank
•A banking company in India is the one which transacts the business of banking
which means accepting, for the purpose of lending and investment of deposits of
money from the public, repayable on demand or otherwise and withdrawableby
cheques, draft, order or otherwise.
•A bank accepts money on deposits, repayable on demand and also earns a
margin of profit by lending money.
•A bank stimulates economic activity in the market by dealing in money. It
mobilisesthe savings of people and makes funds available to business financing
their capital and revenue expenditure.
•Banks can be classified into the following:
1. Commercial banks
2. Cooperative banks
3. Specialisedbanks
4. Central bank
TYPES OF BANKS
COMMERCIAL BANKS
1.Commercial banks are institutions dealing in money. These are
governed by Indian Banking Regulation Act 1949 and according
to it banking means accepting deposits of money from the
public for the purpose of lending or investment.
2.There are three types of commercial banks under Scheduled
Banks , public sector, private sector banks and foreign banks.
Public sectors banks are those in which the government has
a major stake and they usually need to emphasiseon social
objectives than on profitability.
Private sector banks are owned, managed and controlled by
private promoters and they are free to operate as per market
forces.
Foreign Banks are registered and have their headquarters in
foreign country but also have their branches in our country.
3.There are 19 nationalisedpublic sector banks like SBI, PNB, IOB,
UBI etc., and other private sector banks represented by HDFC
Bank, ICICI Bank, KotakMahindra Bank and Jammu and Kashmir
Bank.
COOPERATIVE BANKS
1.Cooperative Banks are governed by the
provisions of State Cooperative
Societies Act and meant essentially for
providing cheap credit to their
members.
2.It is an important source of rural credit
i.e., agricultural financing in India with
funding of areas under agriculture,
livestock, milk, personal finance, self-
employment, setting up of small-scale
units.
3.ExamplesofCo-operative banksare:
Andhra Pradesh StateCo-operative
BankLtd, The Bihar StateCo-operative
BankLtd, ChhatisgarhRajya
SahakariBankMaryadit,TheGoa StateCo-
operative BankLtd, The Gujarat StateCo-
operative BankLtd,
COMMERCIAL BANKS
1.Commercial banks are institutions dealing in money. These are
governed by Indian Banking Regulation Act 1949 and according
to it banking means accepting deposits of money from the
public for the purpose of lending or investment.
2.There are three types of commercial banks under Scheduled
Banks , public sector, private sector banks and foreign banks.
Public sectors banks are those in which the government has
a major stake and they usually need to emphasiseon social
objectives than on profitability.
Private sector banks are owned, managed and controlled by
private promoters and they are free to operate as per market
forces.
Foreign Banks are registered and have their headquarters in
foreign country but also have their branches in our country.
3.There are 19 nationalisedpublic sector banks like SBI, PNB, IOB,
UBI etc., and other private sector banks represented by HDFC
Bank, ICICI Bank, KotakMahindra Bank and Jammu and Kashmir
Bank.
COOPERATIVE BANKS
1.Cooperative Banks are governed by the
provisions of State Cooperative
Societies Act and meant essentially for
providing cheap credit to their
members.
2.It is an important source of rural credit
i.e., agricultural financing in India with
funding of areas under agriculture,
livestock, milk, personal finance, self-
employment, setting up of small-scale
units.
3.ExamplesofCo-operative banksare:
Andhra Pradesh StateCo-operative
BankLtd, The Bihar StateCo-operative
BankLtd, ChhatisgarhRajya
SahakariBankMaryadit,TheGoa StateCo-
operative BankLtd, The Gujarat StateCo-
operative BankLtd,
SPECIALISED BANKS
1.Specialisedbanks are foreign
exchange banks, industrial banks,
development banks, export-import
banks catering to specific needs of
these unique activities.
2.These banks provide financial aid to
industries, heavy turn key projects
and foreign trade.
3.Thesebanksspecialize in providing
financial assistance to a particular
industry or sector. For example,
EXIMBank, SIDBI, NABARD etc.
CENTRAL BANK
1.The Central bank of any country supervises,
controls and regulates the activities of all
the commercial banks of that country. It
also acts as a government banker.
2.It controls and coordinates currency and
credit policies of any country. The Reserve
Bank of India is the central bank of our
country.
1.Specialisedbanks are foreign
exchange banks, industrial banks,
development banks, export-import
banks catering to specific needs of
these unique activities.
2.These banks provide financial aid to
industries, heavy turn key projects
and foreign trade.
3.Thesebanksspecialize in providing
financial assistance to a particular
industry or sector. For example,
EXIMBank, SIDBI, NABARD etc.
CENTRAL BANK
1.The Central bank of any country supervises,
controls and regulates the activities of all
the commercial banks of that country. It
also acts as a government banker.
2.It controls and coordinates currency and
credit policies of any country. The Reserve
Bank of India is the central bank of our
country.
FUNCTIONS OF COMMERCIAL BANKS
•(i) 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.
•(ii) Lending of funds: Second major activity of commercial banks is to provide
loans and advances out of the money received through deposits. These advances
can be made in the form of overdrafts, cash credits, term loans, consumer credits
and other miscellaneous advances. The funds lent out by banks contribute a great
deal to trade, industry, transport and other business activities.
•(iii) Chequefacility: Banks render a very important service to their customers by
collecting their chequesdrawn on other banks. The chequeis the most developed
credit instrument, a unique feature and function of banks for the withdrawal of
deposits. It is the most convenient and an inexpensive medium of exchange.
•(i) 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.
•(ii) Lending of funds: Second major activity of commercial banks is to provide
loans and advances out of the money received through deposits. These advances
can be made in the form of overdrafts, cash credits, term loans, consumer credits
and other miscellaneous advances. The funds lent out by banks contribute a great
deal to trade, industry, transport and other business activities.
•(iii) Chequefacility: Banks render a very important service to their customers by
collecting their chequesdrawn on other banks. The chequeis the most developed
credit instrument, a unique feature and function of banks for the withdrawal of
deposits. It is the most convenient and an inexpensive medium of exchange.
•(iv) Remittance of funds: Another salient function of commercial banks
is of providing the facility of fund transfer from one place to another, on
account of the interconnectivity of branches. The transfer of funds is
done using bank drafts, pay orders or mail transfers, on nominal
commission charges.
•(v) Allied services: In addition to above functions, banks also provide
allied services such as bill payments, locker facilities, underwriting
services. They also perform other services like buying and selling of
shares and debentures on instructions, payment of taxes etc.
is of providing the facility of fund transfer from one place to another, on
account of the interconnectivity of branches. The transfer of funds is
done using bank drafts, pay orders or mail transfers, on nominal
commission charges.
•(v) Allied services: In addition to above functions, banks also provide
allied services such as bill payments, locker facilities, underwriting
services. They also perform other services like buying and selling of
shares and debentures on instructions, payment of taxes etc.
TYPES OF BANK ACCOUNTS
This type of bank account is usually operated by
individuals who deposit and withdraw money at
their convenience. This account promotes small
savings of households. It is mainly maintained by
salaried people.
Freedom to deposit any amount of money and
can withdraw money whenever required but not
more than his balance with the bank.
Banks pay interest at a predetermined rate.
The rate of interest is less than that of fixed
deposit account.
The account holder receives a chequebook, a
pass book and a debit card at the time of opening
the account.
The deposit and withdrawal transactions are
recorded in the pass book.
These deposit accounts are most suitable for
business organisation. In this account, a depositor
can deposit money any number of time and can
withdraw it as and when he/she requires it. Usually
business houses conduct their financial transactions
through current account only.
A businessman has to provide company details,
registered office proof and other documents as
required.
It can be opened with any amount of money.
This account provides add on facilities of overdraft
or credit limit.
No interest is paid on these accounts, rather, the
bank may charge some service charges.
Money can be withdrawn from this account by
chequeor ATM card.
SAVINGS DEPOSIT
ACCOUNT
CURRENT DEPOSIT
ACCOUNT
This type of bank account is usually operated by
individuals who deposit and withdraw money at
their convenience. This account promotes small
savings of households. It is mainly maintained by
salaried people.
Freedom to deposit any amount of money and
can withdraw money whenever required but not
more than his balance with the bank.
Banks pay interest at a predetermined rate.
The rate of interest is less than that of fixed
deposit account.
The account holder receives a chequebook, a
pass book and a debit card at the time of opening
the account.
The deposit and withdrawal transactions are
recorded in the pass book.
These deposit accounts are most suitable for
business organisation. In this account, a depositor
can deposit money any number of time and can
withdraw it as and when he/she requires it. Usually
business houses conduct their financial transactions
through current account only.
A businessman has to provide company details,
registered office proof and other documents as
required.
It can be opened with any amount of money.
This account provides add on facilities of overdraft
or credit limit.
No interest is paid on these accounts, rather, the
bank may charge some service charges.
Money can be withdrawn from this account by
chequeor ATM card.
SAVINGS DEPOSIT
ACCOUNT
CURRENT DEPOSIT
ACCOUNT
RECURRING DEPOSIT
ACCOUNT
It is a type of account which allows the account
holder to save fixed amount on regular basis for a
fixed period of time. Such accounts encourage
regular saving habits amongst individuals.
i.In this type of account a depositor deposits a
fixed amount of money on an annuity basis
(say on monthly basis) for a fixed period.
ii.This money cannot be withdrawn before the
expiry of that fixed term except in special
circumstances. In case the money is
withdrawn, the account holder losses interest
on the deposits made.
iii.Interest is paid at the time of maturity and is
decided on predetermined basis which
depends on amount and the period for which
it is deposited.
iv.Rate of interest on RD Account is generally
higher than that of Savings Account Deposits.
FIXED DEPOSIT
ACCOUNT
A Fixed Deposit is the type of account in which a
amount of money is deposited for a fixed period at a
fixed rate of interest. Usually individuals with surplus
money prefer fixed deposits.
i.Money is deposited in fixed deposit account for a
fixed period of time, say 1 year, 2 years , 3 years or
5 years.
ii.The amount deposited is payable at the time of
maturity.
iii.Pre-mature withdrawal of fixed deposit results in
loss of interest earned.
iv.The rate of interest is higher than that of savings
deposit account.
v.The longer is the period of deposit, the higher will
be the rate of interest. This is so because banks
can use the money for a longer period.
vi.The amount of deposits is repayable by the bank
after the expiry of the fixed term.
ACCOUNT
It is a type of account which allows the account
holder to save fixed amount on regular basis for a
fixed period of time. Such accounts encourage
regular saving habits amongst individuals.
i.In this type of account a depositor deposits a
fixed amount of money on an annuity basis
(say on monthly basis) for a fixed period.
ii.This money cannot be withdrawn before the
expiry of that fixed term except in special
circumstances. In case the money is
withdrawn, the account holder losses interest
on the deposits made.
iii.Interest is paid at the time of maturity and is
decided on predetermined basis which
depends on amount and the period for which
it is deposited.
iv.Rate of interest on RD Account is generally
higher than that of Savings Account Deposits.
FIXED DEPOSIT
ACCOUNT
A Fixed Deposit is the type of account in which a
amount of money is deposited for a fixed period at a
fixed rate of interest. Usually individuals with surplus
money prefer fixed deposits.
i.Money is deposited in fixed deposit account for a
fixed period of time, say 1 year, 2 years , 3 years or
5 years.
ii.The amount deposited is payable at the time of
maturity.
iii.Pre-mature withdrawal of fixed deposit results in
loss of interest earned.
iv.The rate of interest is higher than that of savings
deposit account.
v.The longer is the period of deposit, the higher will
be the rate of interest. This is so because banks
can use the money for a longer period.
vi.The amount of deposits is repayable by the bank
after the expiry of the fixed term.
i.It is a combination of two or more accounts.
ii.It is a type of Saving Deposit Account in which deposit in
excess of a particular limit gets automatically transferred
into Fixed Deposit Account. On the other hand, in case
adequate funds are not available in Savings Deposit
Account to honoura chequeissued, the required amount
gets automatically transferred from Fixed Deposit Account
to Savings Deposit Account. This is also called Auto-Sweep
Facility.
iii.This is also called Multiple Option Deposit
Scheme(MODS).
iv.The owner gets two benefits-
1)He/she can earn more interest.
2)It lowers the risk of dishonouringa cheque.
MULTIPLE OPTION
DEPOSIT ACCOUNT
ii.It is a type of Saving Deposit Account in which deposit in
excess of a particular limit gets automatically transferred
into Fixed Deposit Account. On the other hand, in case
adequate funds are not available in Savings Deposit
Account to honoura chequeissued, the required amount
gets automatically transferred from Fixed Deposit Account
to Savings Deposit Account. This is also called Auto-Sweep
Facility.
iii.This is also called Multiple Option Deposit
Scheme(MODS).
iv.The owner gets two benefits-
1)He/she can earn more interest.
2)It lowers the risk of dishonouringa cheque.
MULTIPLE OPTION
DEPOSIT ACCOUNT
IDENTIFY THE ACCOUNT
•deposit 1000 rupees from pocket money in an account every month for the next 2
years.
RECURRING DEPOSIT ACCOUNT
•A person wants to withdraw 45000 and but his account balance is 30000. An
additional 15000 will be auto-reversed from his FD and he can withdraw total of
45000.
MULTIPLE OPTION DEPOSIT ACCOUNT
•Getting business registered and doing business transactions through the bank.
CURRENT ACCOUNT
•The person has started earning money and would like to place the savings in an
account.
SAVINGS ACCOUNT
•Received prize of 1,00,000 rupees that she would like to place in an account which
offers high rate of interest and has no interest to withdraw money anytime sooner.
FIXED DEPOSIT ACCOUNT
•deposit 1000 rupees from pocket money in an account every month for the next 2
years.
RECURRING DEPOSIT ACCOUNT
•A person wants to withdraw 45000 and but his account balance is 30000. An
additional 15000 will be auto-reversed from his FD and he can withdraw total of
45000.
MULTIPLE OPTION DEPOSIT ACCOUNT
•Getting business registered and doing business transactions through the bank.
CURRENT ACCOUNT
•The person has started earning money and would like to place the savings in an
account.
SAVINGS ACCOUNT
•Received prize of 1,00,000 rupees that she would like to place in an account which
offers high rate of interest and has no interest to withdraw money anytime sooner.
FIXED DEPOSIT ACCOUNT
BANKING SERVICES
BANK DRAFT
It is an instrument issued by bank for transfer of specified
funds to a specified individual or a company , payable at
another branch or another bank at a specified place. It is a
kind of chequewritten by bank on customer’s behalf.
I.The issuing bank either accepts cash or withdraws money
from customer’s account to issue bank draft.
II.The amount payable is written on the draft.
III.The name of the individual or company or institution to
whom the amount is payable is specified on the draft.
IV.It is issued by bank is favourof, either another branch or
other bank payable at a specified place anywhere in India.
(eg–draft issued by Standard Chartered Bank payable at HDFC
Bank, Dehradun)
I.Issuing bank takes guarantee of payment of the draft,
therefore draft is never dishonoured.
II.The bank charges some commission for issuing bank draft.
BANKER’S CHEQUE/PAY ORDER
It is an instrument issued by bank to pay a specified
amount, to a specified individual or a company. It is
payable within same city or town. To get a pay order ,
customer pays money to the bank and the bank in return
issues a chequefor the same amount to be payable to a
specified individual or company as instructed by the
customer.
There are two types of cheque
•Bearer cheques
•Crossed cheques
BANK DRAFT
It is an instrument issued by bank for transfer of specified
funds to a specified individual or a company , payable at
another branch or another bank at a specified place. It is a
kind of chequewritten by bank on customer’s behalf.
I.The issuing bank either accepts cash or withdraws money
from customer’s account to issue bank draft.
II.The amount payable is written on the draft.
III.The name of the individual or company or institution to
whom the amount is payable is specified on the draft.
IV.It is issued by bank is favourof, either another branch or
other bank payable at a specified place anywhere in India.
(eg–draft issued by Standard Chartered Bank payable at HDFC
Bank, Dehradun)
I.Issuing bank takes guarantee of payment of the draft,
therefore draft is never dishonoured.
II.The bank charges some commission for issuing bank draft.
BANKER’S CHEQUE/PAY ORDER
It is an instrument issued by bank to pay a specified
amount, to a specified individual or a company. It is
payable within same city or town. To get a pay order ,
customer pays money to the bank and the bank in return
issues a chequefor the same amount to be payable to a
specified individual or company as instructed by the
customer.
There are two types of cheque
•Bearer cheques
•Crossed cheques
SPECIMEN OF DRAFT
BEARER CHEQUE
SPECIMEN
CROSSED CHEQUE
SPECIMEN
SPECIMEN
CROSSED CHEQUE
SPECIMEN
CASH CREDIT
A Cash Credit is a short term loan where borrower can
withdraw money from the bank within the sanctioned
credit limit. The credit limit is fixed on the basis of
financials of the business and is sanctioned against
security of current assets like debtors, stocks,
investments.
I.This credit limit is determined by the bank’s estimation of
the borrower’s credit worthiness.
II.The sanctioned amount is secured against current assets
like debtors and stock. At times personal assets may be
required as security.
III.The sanctioned limit of cash credit is transferred to
borrower’s current account and the borrower pays
interest on the amount used.
BANK OVERDRAFT
An overdraft is a facility where a customer is
allowed to withdraw more than his balance
in the bank up to an agreed limit.
•Overdraft facility is available against a
security or personal guarantee.
•The bank charges interest on the overdrawn
amount.
•It is a type of temporary loan, where,
amount is settled against deposits received.
•Overdraft facility is available to current
account holders only.
A Cash Credit is a short term loan where borrower can
withdraw money from the bank within the sanctioned
credit limit. The credit limit is fixed on the basis of
financials of the business and is sanctioned against
security of current assets like debtors, stocks,
investments.
I.This credit limit is determined by the bank’s estimation of
the borrower’s credit worthiness.
II.The sanctioned amount is secured against current assets
like debtors and stock. At times personal assets may be
required as security.
III.The sanctioned limit of cash credit is transferred to
borrower’s current account and the borrower pays
interest on the amount used.
BANK OVERDRAFT
An overdraft is a facility where a customer is
allowed to withdraw more than his balance
in the bank up to an agreed limit.
•Overdraft facility is available against a
security or personal guarantee.
•The bank charges interest on the overdrawn
amount.
•It is a type of temporary loan, where,
amount is settled against deposits received.
•Overdraft facility is available to current
account holders only.
E-Banking
•E banking or Internet Banking is a part of virtual banking.
•Internet banking means any user with a PC and a browser can get connected to the
banks website to perform any of the virtual banking functions and avail of any of the
bank’s services.
•Electronic banking is where banks provide services to its customers through the
internet.
•E banking allows a customer to conduct banking transactions like managing accounts,
applying for loans or paying bills through the internet using a computer or a mobile.
•The range of services offered by e-banking are :
Electronic Fund Transfer
Automated Teller Machine (ATM)
Point of Sales (PoS)
Credit and Debit Cards
Digital Cash
•E banking or Internet Banking is a part of virtual banking.
•Internet banking means any user with a PC and a browser can get connected to the
banks website to perform any of the virtual banking functions and avail of any of the
bank’s services.
•Electronic banking is where banks provide services to its customers through the
internet.
•E banking allows a customer to conduct banking transactions like managing accounts,
applying for loans or paying bills through the internet using a computer or a mobile.
•The range of services offered by e-banking are :
Electronic Fund Transfer
Automated Teller Machine (ATM)
Point of Sales (PoS)
Credit and Debit Cards
Digital Cash
TYPES OF DIGITAL PAYMENTS
•Automated Teller Machines (ATMs) –these are the computereisedtelecommunication
device which enable the user to withdraw cash, deposit cheques, find balance is the
account, transfer funds to other accounts or request for a mini bank statement. The
ATM card can be operated using ATM machine and it responds to customer’s request
only if the PIN matches with the ATM Card Code. They work 24 hours a day and 365
days a year.
•DEBIT CARD –it is a plastic card used by the account holder to make payments without
any physical exchange or money. It is issued by a bank to the account holder. A debit
card holder can make payments at the shops or stores which have Point of Sales
terminals which automatically transfers money from customer’s account to seller’s
account. A debit card holder can pay uptothe amount of balance in their account with
the debit card issuing bank.
•CREDIT CARD –It is a plastic card issued by a bank to its customers. The card shows
details namely, name of the customer, his signatures, issue and expiry date of the card,
name of the issuing bank. The bank allows the customer to use the credit card uptothe
maximum credit limit and then make the payment on the due date which is usually
within 45 days of the transaction. In case the customer fails to make payment within
the due date, interest on the amount used along with the late fee is charged to the
customer. The credit limit of a customer depends on his credit worthiness.
•Automated Teller Machines (ATMs) –these are the computereisedtelecommunication
device which enable the user to withdraw cash, deposit cheques, find balance is the
account, transfer funds to other accounts or request for a mini bank statement. The
ATM card can be operated using ATM machine and it responds to customer’s request
only if the PIN matches with the ATM Card Code. They work 24 hours a day and 365
days a year.
•DEBIT CARD –it is a plastic card used by the account holder to make payments without
any physical exchange or money. It is issued by a bank to the account holder. A debit
card holder can make payments at the shops or stores which have Point of Sales
terminals which automatically transfers money from customer’s account to seller’s
account. A debit card holder can pay uptothe amount of balance in their account with
the debit card issuing bank.
•CREDIT CARD –It is a plastic card issued by a bank to its customers. The card shows
details namely, name of the customer, his signatures, issue and expiry date of the card,
name of the issuing bank. The bank allows the customer to use the credit card uptothe
maximum credit limit and then make the payment on the due date which is usually
within 45 days of the transaction. In case the customer fails to make payment within
the due date, interest on the amount used along with the late fee is charged to the
customer. The credit limit of a customer depends on his credit worthiness.
•REAL TIME GROSS SETTLEMENT (RTGS) –it is a system where funds are
transferred through e-banking using internet facility. In this system the funds
are transferred from one bank to another on Real Time and on Gross Basis.
The ‘Real Time’ means that the transaction is processed as soon as the
instructions are received, and processed within RTGS business hours,
processed and settled simultaneously, without bunching or netting with other
transactions. Thus there is not waiting time for RTGS payment.
•NATIONAL ELECTRONIC FUND TRANSFER (NEFT) –It is a mode of transferring
funds from one bank to either other branch of the same bank or to another
bank through e-banking, using internet facility. NEFT functions on net basis,
which means that the settlement of transactions processed are done on
regular intervals. (For example –on weekdays the transfers are settled at
9:30; 10:30; 12:00; 13:00; 15:00 and 16:00 hours and on Saturdays the last
transfer is at 13:00 hours. No transfers or settlements take place on Sundays)
•POINT OF SALES (PoS) Terminals –It is usually a handheld device that reads
banking cards. With digitization the scope of PoSis expanding and this service
is also available on mobile platforms and through internet browsers. There are
three types of PoSterminals such as Physical PoS, Mobile PoSand Virtual PoS.
Physical terminals are kept at shops and stores, mobile terminals work
through a tablet or smartphone. Virtual terminals use web-based applications
to process payments.
transferred through e-banking using internet facility. In this system the funds
are transferred from one bank to another on Real Time and on Gross Basis.
The ‘Real Time’ means that the transaction is processed as soon as the
instructions are received, and processed within RTGS business hours,
processed and settled simultaneously, without bunching or netting with other
transactions. Thus there is not waiting time for RTGS payment.
•NATIONAL ELECTRONIC FUND TRANSFER (NEFT) –It is a mode of transferring
funds from one bank to either other branch of the same bank or to another
bank through e-banking, using internet facility. NEFT functions on net basis,
which means that the settlement of transactions processed are done on
regular intervals. (For example –on weekdays the transfers are settled at
9:30; 10:30; 12:00; 13:00; 15:00 and 16:00 hours and on Saturdays the last
transfer is at 13:00 hours. No transfers or settlements take place on Sundays)
•POINT OF SALES (PoS) Terminals –It is usually a handheld device that reads
banking cards. With digitization the scope of PoSis expanding and this service
is also available on mobile platforms and through internet browsers. There are
three types of PoSterminals such as Physical PoS, Mobile PoSand Virtual PoS.
Physical terminals are kept at shops and stores, mobile terminals work
through a tablet or smartphone. Virtual terminals use web-based applications
to process payments.
•Digital Cash –it is also known as e-currency, e-money, electronic cash, digital
currency or cyber currency. It refers to a system in which a person can securely
pay for goods or services electronically without necessarily involving a bank to
mediate the transaction.
•E-Wallet –it is also called Mobile Wallet which is the digital version of physical
wallet in which money can be kept used whenever needed. A smart phone and a
stable internet connection is required to use E-wallet. It can be used to recharge
phone, pay at various places or send money to another e-wallet. Eg –State Bank
Buddy, ICICI Pockets, Freecharge, Paytmetc.
•AADHAR ENABLED PAYMENT SERVICE (AEPS) –it is a mode of payment which
allows transfer of money from bank to bank. Customer needs to link his or her
Aadharnumber with their respective bank to use AEPS.
With the help of PoSmachines, customers can withdraw or deposit cash or
transfer money to another Aadharlinked account. AEPS doesn’t need your
signature, bank account details or any password. It uses the fingerprint as a
password making AEPS one of the most digital payment mode.
currency or cyber currency. It refers to a system in which a person can securely
pay for goods or services electronically without necessarily involving a bank to
mediate the transaction.
•E-Wallet –it is also called Mobile Wallet which is the digital version of physical
wallet in which money can be kept used whenever needed. A smart phone and a
stable internet connection is required to use E-wallet. It can be used to recharge
phone, pay at various places or send money to another e-wallet. Eg –State Bank
Buddy, ICICI Pockets, Freecharge, Paytmetc.
•AADHAR ENABLED PAYMENT SERVICE (AEPS) –it is a mode of payment which
allows transfer of money from bank to bank. Customer needs to link his or her
Aadharnumber with their respective bank to use AEPS.
With the help of PoSmachines, customers can withdraw or deposit cash or
transfer money to another Aadharlinked account. AEPS doesn’t need your
signature, bank account details or any password. It uses the fingerprint as a
password making AEPS one of the most digital payment mode.
BENEFITS OF E-BANKING
•BENEFITS OF E-BANKING TO CUSTOMERS
It facilitates digital payments and promotes transparency in financial statements.
It provides 24 hours, 365 days a year services to the customers of the bank.
Customers can make some of the permitted transactions from anywhere.
It inculcates a sense of financial discipline by recording each and every transaction.
Greater customer satisfaction by recording each and every transaction.
•BENEFITS OF E-BANKING TO BANKS
It provides competitive advantage to the bank.
It provides unlimited network to the bank and is not limited to the number of
branches. Any modem or telephone having internet connection can provide cash
withdrawal needs of the customer.
Load on branches can be considerably reduced by establishing centraliseddata
base and by taking over some of the accounting functions. Thus reduced cost and
time of handling customers at the bank.
•BENEFITS OF E-BANKING TO CUSTOMERS
It facilitates digital payments and promotes transparency in financial statements.
It provides 24 hours, 365 days a year services to the customers of the bank.
Customers can make some of the permitted transactions from anywhere.
It inculcates a sense of financial discipline by recording each and every transaction.
Greater customer satisfaction by recording each and every transaction.
•BENEFITS OF E-BANKING TO BANKS
It provides competitive advantage to the bank.
It provides unlimited network to the bank and is not limited to the number of
branches. Any modem or telephone having internet connection can provide cash
withdrawal needs of the customer.
Load on branches can be considerably reduced by establishing centraliseddata
base and by taking over some of the accounting functions. Thus reduced cost and
time of handling customers at the bank.
INSURANCE
•It is a means of providing against the loss caused by natural or man-made
factors.
•It is a contract or agreement under which one party agrees in return for a
consideration called premium which may be monthly, quarterly, half-
yearly or annually) to pay an agreed amount of money to another party
to make good a loss, damage or injury to something of value.
•Under the contract of insurance, the person whose risk is insured is
called insured and the person who insures the risk of loss is known as
insurer.
•It is a means of providing against the loss caused by natural or man-made
factors.
•It is a contract or agreement under which one party agrees in return for a
consideration called premium which may be monthly, quarterly, half-
yearly or annually) to pay an agreed amount of money to another party
to make good a loss, damage or injury to something of value.
•Under the contract of insurance, the person whose risk is insured is
called insured and the person who insures the risk of loss is known as
insurer.
FUNDAMENTAL PRINCIPLE OF INSURANCE
•The basic principle of insurance is that an individual or a business concern
chooses to spend a definitely known sum in place of a possible huge amount
involved in an indefinite future loss. Thus insurance is the substitution of a
small periodic payment (premium) for a risk of large possible loss. The loss of
risk still remains but the loss is spread over a large number of policyholders
exposed to the same risk. The premium paid by them are pooled out of which
the loss sustained by any policy holder is compensated. Thus, risks are shared
with others.
•Insurance is defined as the equitable transfer of the risk of a potential loss,
from one entity to another, in exchange for a reasonable fee. Insurance
company, therefore, is an association, corporation or an organisationengaged
in the business of paying all legitimate claims that may arise, in exchange for a
fee (known as premium).
•The basic principle of insurance is that an individual or a business concern
chooses to spend a definitely known sum in place of a possible huge amount
involved in an indefinite future loss. Thus insurance is the substitution of a
small periodic payment (premium) for a risk of large possible loss. The loss of
risk still remains but the loss is spread over a large number of policyholders
exposed to the same risk. The premium paid by them are pooled out of which
the loss sustained by any policy holder is compensated. Thus, risks are shared
with others.
•Insurance is defined as the equitable transfer of the risk of a potential loss,
from one entity to another, in exchange for a reasonable fee. Insurance
company, therefore, is an association, corporation or an organisationengaged
in the business of paying all legitimate claims that may arise, in exchange for a
fee (known as premium).
FUNCTIONS OF INSURANCE
•(i) Providing certainty: Insurance provides certainityof payment for the risk of
loss. There are uncertainties of happenings of time and amount of loss.
Insurance removes these uncertainties and the assured receives payment of
loss. The insurer charges premium for providing the certainity.
•(ii) Protection: The second main function of insurance is to provide protection
from probable chances of loss. Insurance cannot stop the happening of a risk or
event but can compensate for losses arising out of it.
•(iii) Risk sharing: On the happening of a risk event, the loss is shared by all the
persons exposed to it. The share is obtained from every insured member by way
of premiums.
•(iv) Assist in capital formation: The accumulated funds of the insurer received
by way of premium payments made by the insured are invested in various
income generating schemes.
•(i) Providing certainty: Insurance provides certainityof payment for the risk of
loss. There are uncertainties of happenings of time and amount of loss.
Insurance removes these uncertainties and the assured receives payment of
loss. The insurer charges premium for providing the certainity.
•(ii) Protection: The second main function of insurance is to provide protection
from probable chances of loss. Insurance cannot stop the happening of a risk or
event but can compensate for losses arising out of it.
•(iii) Risk sharing: On the happening of a risk event, the loss is shared by all the
persons exposed to it. The share is obtained from every insured member by way
of premiums.
•(iv) Assist in capital formation: The accumulated funds of the insurer received
by way of premium payments made by the insured are invested in various
income generating schemes.
PRINCIPLES OF INSURANCE
•(ii) Insurable Interest: The insured must have an insurable interest in the
subject matter of insurance. One fundamental fact of this principle is that
‘it is not the house, ship, machinery, potential liability of life that is insured,
but it is the pecuniary interest of the insured in them, which is insured.’
Insurable interest means some pecuniary(economic/monetary/financial)
interest in the subject matter of the insurance contract. The insured must
have an interest in the preservation of the thing or life insured, so that
he/she will suffer financially on the happening of the event against which
he/she is insured.
In case of insurance of property, insurable interest of the insured in the
subject matter of the insurance must exist at the time of happening of the
event. In order to name insurable interest however, it is not necessary that
one should be the owner of the property.
For example, a businessman may insure the rented warehouse building.
Though he does not own it but will suffer loss if any damage happens to
the building.
A father can take insurance policy for his son but not for his neighbour’sson.
subject matter of insurance. One fundamental fact of this principle is that
‘it is not the house, ship, machinery, potential liability of life that is insured,
but it is the pecuniary interest of the insured in them, which is insured.’
Insurable interest means some pecuniary(economic/monetary/financial)
interest in the subject matter of the insurance contract. The insured must
have an interest in the preservation of the thing or life insured, so that
he/she will suffer financially on the happening of the event against which
he/she is insured.
In case of insurance of property, insurable interest of the insured in the
subject matter of the insurance must exist at the time of happening of the
event. In order to name insurable interest however, it is not necessary that
one should be the owner of the property.
For example, a businessman may insure the rented warehouse building.
Though he does not own it but will suffer loss if any damage happens to
the building.
A father can take insurance policy for his son but not for his neighbour’sson.
•(iii) Indemnity:
All insurance contracts of fire or marine insurance are contracts of indemnity. According to it, the
insurer undertakes to put the insured, in the event of loss, in the same position that he
occupied immediately before the happening of the event insured against. In other words the
insurer undertakes to compensate the insured for the loss caused to him/her due to damage or
destruction of property insured. The compensation payable and the loss suffered are to be
measured in terms of money. The principle of indemnity is not applicable to life insurance.
Eg –a businessman gets his stock of goods insured for 4,00,000. If the goods are destroyed by
fire, the insurance company will be liable to pay compensation for the loss caused to the
insured. However, maximum compensation shall be 4,00,000 even if loss is more than this.
(iv) Proximate Cause:
According to this principle, an insurance policy is designed to provide compensation only for such
losses as are caused by the perils which are stated in the policy. When the loss is the result of
two or more causes, the proximate cause means the direct, the most dominant and most
effective cause of which the loss is the natural consequence. In case of loss arising out of any
mishap, the most proximate cause of the mishap should be taken into consideration.
Eg –in case of fire insurance, ‘fire’ should be accepted as the proximate cause of loss. If there
had been no fire and goods would have destroyed due to excessive heat, the insurance policy
would not be liable to pay compensation.
All insurance contracts of fire or marine insurance are contracts of indemnity. According to it, the
insurer undertakes to put the insured, in the event of loss, in the same position that he
occupied immediately before the happening of the event insured against. In other words the
insurer undertakes to compensate the insured for the loss caused to him/her due to damage or
destruction of property insured. The compensation payable and the loss suffered are to be
measured in terms of money. The principle of indemnity is not applicable to life insurance.
Eg –a businessman gets his stock of goods insured for 4,00,000. If the goods are destroyed by
fire, the insurance company will be liable to pay compensation for the loss caused to the
insured. However, maximum compensation shall be 4,00,000 even if loss is more than this.
(iv) Proximate Cause:
According to this principle, an insurance policy is designed to provide compensation only for such
losses as are caused by the perils which are stated in the policy. When the loss is the result of
two or more causes, the proximate cause means the direct, the most dominant and most
effective cause of which the loss is the natural consequence. In case of loss arising out of any
mishap, the most proximate cause of the mishap should be taken into consideration.
Eg –in case of fire insurance, ‘fire’ should be accepted as the proximate cause of loss. If there
had been no fire and goods would have destroyed due to excessive heat, the insurance policy
would not be liable to pay compensation.
•(v) Subrogation:
It refers to the right of the insurer to stand in the place of the insured, after settlement of a claim, as far as the
right of insured in respect of recovery from an alternative source is involved. After the insured is
compensated for the loss or damage to the property insured by him/her the right of ownership of such
property passes on to the insurer. This is because the insured should not be allowed to make any profit, by
selling the damaged property or in the case of lost property being recovered.
Eg –MrY gets his motor car insured. Some of its parts got damaged in a road accident. He gets insurance claim
and gets the damaged parts replaced with the new ones. But the damaged parts will be taken by the
insurance company. The insured has no right over the damaged parts since he has already got compensation
for the loss.
•(vi) Contribution:
When more than one insurance policy is taken to cover the same risk, then it is known as ‘Double Insurance’.
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 him for the actual amount of loss.
Separately, the insured cannot claim total loss from each insurer because he has no right to recover more than
the full amount of his actual loss.
When there is more than one policy on the same property, the insured will have no right to recover more than
the full amount of his actual loss. If the full amount is recovered from one insurer the right to obtain further
payment from the other insurer will cease.
Example –a businessman gets his factory insured against fire for 5,00,000 with insurer A and 3,00,000 with
insurer B. Due to fire, a loss of 1,60,000 occurred. Then, insurers A and B will contribute the loss in the ratio
5:3 and will be liable to pay 1,00,000 (5/8 of 1,60,000) and 60,000 (3/8 of 1,60,000) respectively to the
businessman.
It refers to the right of the insurer to stand in the place of the insured, after settlement of a claim, as far as the
right of insured in respect of recovery from an alternative source is involved. After the insured is
compensated for the loss or damage to the property insured by him/her the right of ownership of such
property passes on to the insurer. This is because the insured should not be allowed to make any profit, by
selling the damaged property or in the case of lost property being recovered.
Eg –MrY gets his motor car insured. Some of its parts got damaged in a road accident. He gets insurance claim
and gets the damaged parts replaced with the new ones. But the damaged parts will be taken by the
insurance company. The insured has no right over the damaged parts since he has already got compensation
for the loss.
•(vi) Contribution:
When more than one insurance policy is taken to cover the same risk, then it is known as ‘Double Insurance’.
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 him for the actual amount of loss.
Separately, the insured cannot claim total loss from each insurer because he has no right to recover more than
the full amount of his actual loss.
When there is more than one policy on the same property, the insured will have no right to recover more than
the full amount of his actual loss. If the full amount is recovered from one insurer the right to obtain further
payment from the other insurer will cease.
Example –a businessman gets his factory insured against fire for 5,00,000 with insurer A and 3,00,000 with
insurer B. Due to fire, a loss of 1,60,000 occurred. Then, insurers A and B will contribute the loss in the ratio
5:3 and will be liable to pay 1,00,000 (5/8 of 1,60,000) and 60,000 (3/8 of 1,60,000) respectively to the
businessman.
LIFE INSURANCE
•A life insurance policy is basically a protection against the uncertainty of life, that is death.
•Life insurance may be defined as a contract in which the insurance company (called
insurer) undertakes to insure the life of a person (called assured) in exchange of a sum of
money called premium (which may be paid in one lump sum or monthly, quarterly, half
yearly or yearly and promises to pay a certain sum of money either on the death of the
assured or on expiry of certain period.
•This agreement or contract which contains all the terms and conditions is put in writing
and such document is called the policy. The person whose life is insured is called the
assured. The insurance company is the insurer and the consideration paid by the assured
is the premium.
•Importance of Life Insurance :
life insurance provides protection to the family at premature death of an individual.
It gives adequate amount at an old age when earning capacities are reduced.
Life insurance is not only a protection but is a sort of investment because a certain sum is returnable to
the assured at the time of death or at the expiry of a certain period.
Life insurance also encourages savings as the amount of premium has to be paid regularly. It thus,
provides a sense of security to the insured and his dependents.
•A life insurance policy is basically a protection against the uncertainty of life, that is death.
•Life insurance may be defined as a contract in which the insurance company (called
insurer) undertakes to insure the life of a person (called assured) in exchange of a sum of
money called premium (which may be paid in one lump sum or monthly, quarterly, half
yearly or yearly and promises to pay a certain sum of money either on the death of the
assured or on expiry of certain period.
•This agreement or contract which contains all the terms and conditions is put in writing
and such document is called the policy. The person whose life is insured is called the
assured. The insurance company is the insurer and the consideration paid by the assured
is the premium.
•Importance of Life Insurance :
life insurance provides protection to the family at premature death of an individual.
It gives adequate amount at an old age when earning capacities are reduced.
Life insurance is not only a protection but is a sort of investment because a certain sum is returnable to
the assured at the time of death or at the expiry of a certain period.
Life insurance also encourages savings as the amount of premium has to be paid regularly. It thus,
provides a sense of security to the insured and his dependents.
MAIN ELEMENTS OF A LIFE INSURANCE CONTRACT
1.The contract of life insurance is a contract of utmost good faith. The assured should
be honest and truthful in giving information to the insurance company. He must
disclose all material facts about his health to the insurer. It is his duty to disclose
accurately all material facts known to him even if the insurer does not ask him;
2.In life insurance, the insured must have insurable interest in the life assured. Without
insurable interest the contract of insurance is void. In case of life insurance, insurable
interest must be present at the time when the insurance is affected. It is not
necessary that the assured should have insurable interest at the time of maturity also.
For example, a person is presumed to have an interest in his own life and every part of it,
a creditor has an insurable interest in the life of his debtor, and a proprietor of a
drama company has an insurable interest in the lives of the actors;
3. Life insurance contract is not a contract of indemnity. The life of a human being
cannot be compensated and only a specified sum of money is paid. That is why the
amount payable in life insurance on the happening of the event is fixed in advance.
The sum of money payable is fixed, at the time of entering into the contract. A
contract of life insurance, therefore, is not a contract of indemnity.
1.The contract of life insurance is a contract of utmost good faith. The assured should
be honest and truthful in giving information to the insurance company. He must
disclose all material facts about his health to the insurer. It is his duty to disclose
accurately all material facts known to him even if the insurer does not ask him;
2.In life insurance, the insured must have insurable interest in the life assured. Without
insurable interest the contract of insurance is void. In case of life insurance, insurable
interest must be present at the time when the insurance is affected. It is not
necessary that the assured should have insurable interest at the time of maturity also.
For example, a person is presumed to have an interest in his own life and every part of it,
a creditor has an insurable interest in the life of his debtor, and a proprietor of a
drama company has an insurable interest in the lives of the actors;
3. Life insurance contract is not a contract of indemnity. The life of a human being
cannot be compensated and only a specified sum of money is paid. That is why the
amount payable in life insurance on the happening of the event is fixed in advance.
The sum of money payable is fixed, at the time of entering into the contract. A
contract of life insurance, therefore, is not a contract of indemnity.
FIRE INSURANCE
•Fire insurance is a contract whereby the insurer, in consideration of the
premium paid, undertakes to make good any loss or damage caused by fire
during a specified period uptothe amount specified in the policy. Normally,
the fire insurance policy is for a period of one year after which it is to be
renewed from time to time. The premium may be paid either in lump sum or
instalments.
•A claim for loss by fire must satisfy the two following conditions:
o(i) There must be actual loss; and
o(ii) Fire must be accidental and non intentional.
•The risk covered by a fire insurance contract is the loss resulting from fire or
some other cause, and which is the proximate cause of the loss. If
overheating without ignition causes damage, it will not be regarded as a
firelosswithin the meaning of fire insurance and the loss will not be
recoverable from the insurer.
•Fire insurance is a contract whereby the insurer, in consideration of the
premium paid, undertakes to make good any loss or damage caused by fire
during a specified period uptothe amount specified in the policy. Normally,
the fire insurance policy is for a period of one year after which it is to be
renewed from time to time. The premium may be paid either in lump sum or
instalments.
•A claim for loss by fire must satisfy the two following conditions:
o(i) There must be actual loss; and
o(ii) Fire must be accidental and non intentional.
•The risk covered by a fire insurance contract is the loss resulting from fire or
some other cause, and which is the proximate cause of the loss. If
overheating without ignition causes damage, it will not be regarded as a
firelosswithin the meaning of fire insurance and the loss will not be
recoverable from the insurer.
ELEMENTS OF FIRE INSURANCE
•(i) In fire insurance, the insured must have insurable interest in the subject matter
of the insurance. Without insurable interest the contract of insurance is void. In
case of fire insurance, unlike life insurance insurable interest must be present both
at the time of insurance and at the time of loss. For example, a person has
insurable interest in the property he owns, a businessman has insurable interest in
his stock, plant, machinery and building, an agent has an insurable interest in the
property of his principal, a partner has insurable interest in the property of a
partnership firm, and a mortgagee has insurable interest in the property, which is
mortgaged.
•(ii) Similar to the life insurance contract, the contract of fire insurance is a contract
of utmost good faith i.e., uberrimaefidei. The insured should be truthful and
honest in giving information to the insurance company regarding the subject
matter of the insurance. He is duty-bound to disclose accurately all facts regarding
the nature of property and risks attached to it. The insurance company should also
disclose the facts of the policy to the proposer.
•(i) In fire insurance, the insured must have insurable interest in the subject matter
of the insurance. Without insurable interest the contract of insurance is void. In
case of fire insurance, unlike life insurance insurable interest must be present both
at the time of insurance and at the time of loss. For example, a person has
insurable interest in the property he owns, a businessman has insurable interest in
his stock, plant, machinery and building, an agent has an insurable interest in the
property of his principal, a partner has insurable interest in the property of a
partnership firm, and a mortgagee has insurable interest in the property, which is
mortgaged.
•(ii) Similar to the life insurance contract, the contract of fire insurance is a contract
of utmost good faith i.e., uberrimaefidei. The insured should be truthful and
honest in giving information to the insurance company regarding the subject
matter of the insurance. He is duty-bound to disclose accurately all facts regarding
the nature of property and risks attached to it. The insurance company should also
disclose the facts of the policy to the proposer.
•(iii) The contract of fire insurance is a contract of strict indemnity. The
insured can, in the event of loss, recover the actual amount of loss
from the insurer. This is subject to the maximum amount for which
the subject matter is insured. For example, if a person has insured his
house for ` 4,00,000 the insurer is not necessarily liable to pay that
amount, although the house may have been totally destroyed by fire;
but he will pay the actual loss after deducting depreciation within the
maximum limit of ` 4,00,000. The purpose being that a person should
not be allowed to gain by insurance.
•(iv) The insurer is liable to compensate only when fire is the
proximate cause of damage or loss.
insured can, in the event of loss, recover the actual amount of loss
from the insurer. This is subject to the maximum amount for which
the subject matter is insured. For example, if a person has insured his
house for ` 4,00,000 the insurer is not necessarily liable to pay that
amount, although the house may have been totally destroyed by fire;
but he will pay the actual loss after deducting depreciation within the
maximum limit of ` 4,00,000. The purpose being that a person should
not be allowed to gain by insurance.
•(iv) The insurer is liable to compensate only when fire is the
proximate cause of damage or loss.
MARINE INSURANCE
•A marine insurance contract is an agreement whereby the insurer undertakes to
indemnify the insured in the manner and to the extent thereby agreed against marine
losses.
•Marine insurance provides protection against loss by marine perils or perils of the sea.
Marine perils are collision of ship with the rock, or ship attacked by the enemies, fire
and captured by pirates and actions of the captains and crew of the ship. These perils
cause damage, destruction or disappearance of the ship and cargo and non-payment of
freight.
•There are three things involved i.e., ship or hull, cargo or goods, and freight.
(a) Ship or hull insurance: Since the ship is exposed to many dangers at sea, the insurance
policy is for indemnifying the insured for losses caused by damage to the ship.
(b) Cargo insurance: The cargo while being transported by ship is subject to many risks.
These may be at port i.e., risk of theft, lost goods or on voyage etc. Thus, an insurance
policy can be issued to cover against such risks to cargo.
(c) Freight insurance: If the cargo does not reach the destination due to damage or loss in
transit, the shipping company is not paid freight charges. Freight insurance is for
reimbursing the loss of freight to the shipping company i.e., the insured.
•A marine insurance contract is an agreement whereby the insurer undertakes to
indemnify the insured in the manner and to the extent thereby agreed against marine
losses.
•Marine insurance provides protection against loss by marine perils or perils of the sea.
Marine perils are collision of ship with the rock, or ship attacked by the enemies, fire
and captured by pirates and actions of the captains and crew of the ship. These perils
cause damage, destruction or disappearance of the ship and cargo and non-payment of
freight.
•There are three things involved i.e., ship or hull, cargo or goods, and freight.
(a) Ship or hull insurance: Since the ship is exposed to many dangers at sea, the insurance
policy is for indemnifying the insured for losses caused by damage to the ship.
(b) Cargo insurance: The cargo while being transported by ship is subject to many risks.
These may be at port i.e., risk of theft, lost goods or on voyage etc. Thus, an insurance
policy can be issued to cover against such risks to cargo.
(c) Freight insurance: If the cargo does not reach the destination due to damage or loss in
transit, the shipping company is not paid freight charges. Freight insurance is for
reimbursing the loss of freight to the shipping company i.e., the insured.
ELEMENTS OF MARINE INSURANCE
•(i) Unlike life insurance, the contract of marine insurance is a contract of
indemnity. The insured can, in the event of loss recover the actual amount of loss
from the insurer.Underno circumstances, the insured is allowed to make profit
out of the marine insurance contract.
•(ii) Similar to life and fire insurance, the contract of marine insurance is a contract
ofutmost good faith. Both the insured and insurer must disclose everything,
which is in their knowledge and can affect the insurance contract. The insured is
duty-bound to accurately disclose all facts which include the nature of shipment
and the risk of damage it is exposed to;
•(iii) Insurable interest must exist at the time of loss but not necessary at the time
when the policy was taken;
•(iv) The principle of causaproximawill apply to it. The insurance company will be
liable to pay only if that particular or nearest cause is covered by the policy. For
example, if a loss is caused by several reasons then nearest cause of loss will be
considered.
•(i) Unlike life insurance, the contract of marine insurance is a contract of
indemnity. The insured can, in the event of loss recover the actual amount of loss
from the insurer.Underno circumstances, the insured is allowed to make profit
out of the marine insurance contract.
•(ii) Similar to life and fire insurance, the contract of marine insurance is a contract
ofutmost good faith. Both the insured and insurer must disclose everything,
which is in their knowledge and can affect the insurance contract. The insured is
duty-bound to accurately disclose all facts which include the nature of shipment
and the risk of damage it is exposed to;
•(iii) Insurable interest must exist at the time of loss but not necessary at the time
when the policy was taken;
•(iv) The principle of causaproximawill apply to it. The insurance company will be
liable to pay only if that particular or nearest cause is covered by the policy. For
example, if a loss is caused by several reasons then nearest cause of loss will be
considered.
HEALTH INSURANCE
•Disability resulting from illness or accident may be peril to family
because it not only cuts off income but also creates large medical
expenses. Health insurance is a safeguard against such medical costs.
In India, presently the health insurance exists primarily in the form of
Mediclaimpolicy.
•Health Insurance provides following types of coverage:
1.Medical expenses: it covers the expenses of hospitalisation/nursing home
bills and doctor’s services.
2.Disability income: it replaces the income lost while the insured is unable to
work.
•Disability resulting from illness or accident may be peril to family
because it not only cuts off income but also creates large medical
expenses. Health insurance is a safeguard against such medical costs.
In India, presently the health insurance exists primarily in the form of
Mediclaimpolicy.
•Health Insurance provides following types of coverage:
1.Medical expenses: it covers the expenses of hospitalisation/nursing home
bills and doctor’s services.
2.Disability income: it replaces the income lost while the insured is unable to
work.
BASIS LIFE INSURANCE FIRE INSURANCE MARINE INSURANCE
SubjectMatterThe subjectmatter of insurance
is human life.
The subject matter is any
physicalproperty or assets.
The subject matter is a ship,
cargo or freight.
Element Lifeinsurance has the elements
of protection and investment or
both.
Fire insurance has only the
element of protectionand not
the element of investment.
Marine insurancehas only the
element of protection.
Insurable InterestInsurableinterest must be
present at the time of effecting
the policy, but need not
necessary at the time when the
claim falls due.
Insurable intereston the
subject matter must be present
both at the time of effecting the
policy as well as when the claim
falls due.
Insurableinterest must be
present at the time when claim
falls due or at the time of loss
only.
Duration Life insurancepolicy usually
exceeds 1 year and is taken for
longer periods ranging from 5 to
30 years or whole life.
Fire insurancepolicy usually
does not exceed one year.
Marine insurance policy is for
one yearor period of voyage or
mixed.
Loss
Measurement
Loss is not measurable. Loss is measurable. Loss is measurable.
SubjectMatterThe subjectmatter of insurance
is human life.
The subject matter is any
physicalproperty or assets.
The subject matter is a ship,
cargo or freight.
Element Lifeinsurance has the elements
of protection and investment or
both.
Fire insurance has only the
element of protectionand not
the element of investment.
Marine insurancehas only the
element of protection.
Insurable InterestInsurableinterest must be
present at the time of effecting
the policy, but need not
necessary at the time when the
claim falls due.
Insurable intereston the
subject matter must be present
both at the time of effecting the
policy as well as when the claim
falls due.
Insurableinterest must be
present at the time when claim
falls due or at the time of loss
only.
Duration Life insurancepolicy usually
exceeds 1 year and is taken for
longer periods ranging from 5 to
30 years or whole life.
Fire insurancepolicy usually
does not exceed one year.
Marine insurance policy is for
one yearor period of voyage or
mixed.
Loss
Measurement
Loss is not measurable. Loss is measurable. Loss is measurable.
BASIS LIFE INSURANCE FIRE INSURANCEMARINE INSURANCE
Indemnity Lifeinsurance is not based on the
principle of indemnity. The sum
assured is paid either on the
happening of certain event or on
maturity of the policy.
Fire insurance is a contract of
indemnity. The insured canclaim
only the actual amount of loss
from the insurer. The loss due to
the fire is indemnified subject to
the maximum limit of the policy
amount.
Marine insurance is a contract of
indemnity.The insured can claim
the market value of the ship and
the cost of goods destroyed at
sea and the loss will be
indemnified.
Surrendervalue
or paid up value
Life insurancepolicy has
surrender value or paid up value.
Fireinsurancepolicy does not
have any surrender value or paid
up value.
Marine insurance does not have
any surrender value or paid up
value.
Policy amount One can insure for any amountin
life insurance.
In fire insurance, the amount of
the policy cannotbe more than
the value of the subject matter.
In marine insurance, the amount
of the policy cannot exceedthe
market value of the ship or cargo.
Contingencyof
risk
There is an elementof certainty.
The event (Death) of maturity or
policy is bound to happen.
Therefore a claim will be present.
The event –destructionby fire
may not happen. There is an
element of uncertainty and there
may be no claim.
The event –loss atsea may not
occur and there may be no claim.
There is an element of
uncertainty.
Indemnity Lifeinsurance is not based on the
principle of indemnity. The sum
assured is paid either on the
happening of certain event or on
maturity of the policy.
Fire insurance is a contract of
indemnity. The insured canclaim
only the actual amount of loss
from the insurer. The loss due to
the fire is indemnified subject to
the maximum limit of the policy
amount.
Marine insurance is a contract of
indemnity.The insured can claim
the market value of the ship and
the cost of goods destroyed at
sea and the loss will be
indemnified.
Surrendervalue
or paid up value
Life insurancepolicy has
surrender value or paid up value.
Fireinsurancepolicy does not
have any surrender value or paid
up value.
Marine insurance does not have
any surrender value or paid up
value.
Policy amount One can insure for any amountin
life insurance.
In fire insurance, the amount of
the policy cannotbe more than
the value of the subject matter.
In marine insurance, the amount
of the policy cannot exceedthe
market value of the ship or cargo.
Contingencyof
risk
There is an elementof certainty.
The event (Death) of maturity or
policy is bound to happen.
Therefore a claim will be present.
The event –destructionby fire
may not happen. There is an
element of uncertainty and there
may be no claim.
The event –loss atsea may not
occur and there may be no claim.
There is an element of
uncertainty.
POSTAL SERVICES
•Mail/Post –It is a system for physically transporting documents and other small packages, as well
a term for postcards, letters etc themselves.
•Registered Post-it refers to the postal facility where it is ensured that the mail is delivered to the
addressee; otherwise it should come back to the sender. Registered post mails are handed over to
the post office after affixing additional postage as registration charges. On receiving the mail, the
post office issues a receipt to the sender as a proof. To distinguish them from the ordinary post, all
registered mails are superscribed as ‘Registered Post’ on their face.
•Parcel–it is service of postal administration for sending books, garments, cell phones etc through
the post across the country as well as outside the country. It is generally one of the less expensive
ways to ship packages that are too heavy to be sent by regular letter post.
•Speed Post –it refers to the postal facility where the mail reaches the addressee as fast as
possible. Under this facility, post offices provide time bound and guaranteed mail delivery of letter,
important documents etc. The post office charges more postage for speed post than ordinary mail.
The postal charges varies according to distance.
•Courier Services –it is a service provided by post offices for sending and receiving letters,
documents, parcels etc. This services is comparatively cheaper than the services provided by the
post offices.
•Mail/Post –It is a system for physically transporting documents and other small packages, as well
a term for postcards, letters etc themselves.
•Registered Post-it refers to the postal facility where it is ensured that the mail is delivered to the
addressee; otherwise it should come back to the sender. Registered post mails are handed over to
the post office after affixing additional postage as registration charges. On receiving the mail, the
post office issues a receipt to the sender as a proof. To distinguish them from the ordinary post, all
registered mails are superscribed as ‘Registered Post’ on their face.
•Parcel–it is service of postal administration for sending books, garments, cell phones etc through
the post across the country as well as outside the country. It is generally one of the less expensive
ways to ship packages that are too heavy to be sent by regular letter post.
•Speed Post –it refers to the postal facility where the mail reaches the addressee as fast as
possible. Under this facility, post offices provide time bound and guaranteed mail delivery of letter,
important documents etc. The post office charges more postage for speed post than ordinary mail.
The postal charges varies according to distance.
•Courier Services –it is a service provided by post offices for sending and receiving letters,
documents, parcels etc. This services is comparatively cheaper than the services provided by the
post offices.
•The bank issues financial instrument, with the help of which money can be sent from one
place to another. Identify this instrument.
Cheque
•Which is also termed as contract of Assurance?
Life Insurance
•Mention any two methods of advancing loans by the commercial banks.
Overdraft and Cash Credit
•Who can get an overdraft from a bank?
Any business organisationoperating their transactions through current account.
•In which type of insurance, insurable interest must exist both at the time of insurance and at
the time of loss?
Fire insurance
•Name the principle of insurance which states that it is the duty of the insured to take
reasonable steps to minimize the loss or damage to the insured property.
Principle of Mitigation
•Name the type of insurance wherein insurable interest need not exist when the policy is
taken.
Marine Insurance
place to another. Identify this instrument.
Cheque
•Which is also termed as contract of Assurance?
Life Insurance
•Mention any two methods of advancing loans by the commercial banks.
Overdraft and Cash Credit
•Who can get an overdraft from a bank?
Any business organisationoperating their transactions through current account.
•In which type of insurance, insurable interest must exist both at the time of insurance and at
the time of loss?
Fire insurance
•Name the principle of insurance which states that it is the duty of the insured to take
reasonable steps to minimize the loss or damage to the insured property.
Principle of Mitigation
•Name the type of insurance wherein insurable interest need not exist when the policy is
taken.
Marine Insurance
•MrShyamtook an Insurance Policy against his car and after three months he sold it to Mr.Sunil.
The car was stolen from outside of MrSunil’s house. Mr. Shaammade a claim to the insurance
company. His claim was rejected.
1.Was insurance company’s verdict correct?
2.Was Mr. Shaamright in making claim? Give reasons
3.Who can claim compensation?
ANS
1.Yes , the verdict of insurance company is correct.
2.No, Mr. Shyamcannot claim compensation from the insurance company because he has already sold it the
car. The principle of Insurable Interest states that the insured must have insurable interest at the time of loss.
3.MrSunil can claim compensation from the insurance company since he has insurable interest at the time of
loss.
• Rishabhtook marine insurance policy to cover the goods exported by him. Under the
policy goods have been insured against damage likely to be caused by sea-water. During the
voyage a hole was caused in the bottom of the ship. Through this hole sea water entered into
the ship which damaged the goods insured. Can Rishabhclaim compensation for this loss?
ANS
Yes, Rishabhcan recover the compensation from the insurance company. Reason is : there are two causes of
the mishap –firstly hole caused in the bottom of the ship and secondly, seepage of sea water into the
ship. The nearest cause of the damage caused to the goods is the seepage of the water, the hole in the
bottom of the ship is the remote cause. Therefore, Rishabhmust be compensated for the loss caused by
the damage to the goods covered by the policy. (Principle of CausaProxima) explain
The car was stolen from outside of MrSunil’s house. Mr. Shaammade a claim to the insurance
company. His claim was rejected.
1.Was insurance company’s verdict correct?
2.Was Mr. Shaamright in making claim? Give reasons
3.Who can claim compensation?
ANS
1.Yes , the verdict of insurance company is correct.
2.No, Mr. Shyamcannot claim compensation from the insurance company because he has already sold it the
car. The principle of Insurable Interest states that the insured must have insurable interest at the time of loss.
3.MrSunil can claim compensation from the insurance company since he has insurable interest at the time of
loss.
• Rishabhtook marine insurance policy to cover the goods exported by him. Under the
policy goods have been insured against damage likely to be caused by sea-water. During the
voyage a hole was caused in the bottom of the ship. Through this hole sea water entered into
the ship which damaged the goods insured. Can Rishabhclaim compensation for this loss?
ANS
Yes, Rishabhcan recover the compensation from the insurance company. Reason is : there are two causes of
the mishap –firstly hole caused in the bottom of the ship and secondly, seepage of sea water into the
ship. The nearest cause of the damage caused to the goods is the seepage of the water, the hole in the
bottom of the ship is the remote cause. Therefore, Rishabhmust be compensated for the loss caused by
the damage to the goods covered by the policy. (Principle of CausaProxima) explain
•Name the banking service in which the customer can conduct banking activities like managing savings,
checking accounts, applying for loans etc over the internet. State its benefits.
E-Banking
•Ashishinsured his factory for 5 lakh against fire. Due to fire, he suffered a loss of 2 lakh. How much amount
he can recover from the insurance company? Why?
Ashishcan recover 2 lakh from the insurance company (not the policy amount, that is 5 lakh) since he has suffered a loss of
2 lakh only. As per Principle of Indemnity, purpose of insurance is to compensate for loss and not to earn profit. (explain
the principle)
•Shubhamhas taken a loan from Kartikagainst the security of his factory. Can Kartiktake a fire insurance
policy of that factory?
Yes, Kartik(the lender) can take a fire insurance policy of the factory though he is not its owner , because he has financial
interest in the factory premises (Principle of Insurable interest) explain
•A person suffering from cancer did not disclose this fact while taking life insurance policy. Name and explain
the principle violated in the above statement.
Principle of Utmost Good Faith is violated (explain)
•Anil has taken a fire insurance policy for his factory. Due to fire he suffered a loss of 2 lakh and gets the
compensation for the same. The half-burnt goods can be sold for 30,000 rupees. Who has the right over it?
Why?
The insurance company has the right over the amount realisedby selling the half burnt goods after it has paid
compensation for the loss to the insured. Anil cannot make any profit by selling the half burnt goods. (explain
–Principle of Subrogation)
checking accounts, applying for loans etc over the internet. State its benefits.
E-Banking
•Ashishinsured his factory for 5 lakh against fire. Due to fire, he suffered a loss of 2 lakh. How much amount
he can recover from the insurance company? Why?
Ashishcan recover 2 lakh from the insurance company (not the policy amount, that is 5 lakh) since he has suffered a loss of
2 lakh only. As per Principle of Indemnity, purpose of insurance is to compensate for loss and not to earn profit. (explain
the principle)
•Shubhamhas taken a loan from Kartikagainst the security of his factory. Can Kartiktake a fire insurance
policy of that factory?
Yes, Kartik(the lender) can take a fire insurance policy of the factory though he is not its owner , because he has financial
interest in the factory premises (Principle of Insurable interest) explain
•A person suffering from cancer did not disclose this fact while taking life insurance policy. Name and explain
the principle violated in the above statement.
Principle of Utmost Good Faith is violated (explain)
•Anil has taken a fire insurance policy for his factory. Due to fire he suffered a loss of 2 lakh and gets the
compensation for the same. The half-burnt goods can be sold for 30,000 rupees. Who has the right over it?
Why?
The insurance company has the right over the amount realisedby selling the half burnt goods after it has paid
compensation for the loss to the insured. Anil cannot make any profit by selling the half burnt goods. (explain
–Principle of Subrogation)
•Name and briefly explain the following:
•An insurance policy for indemnifying the insured for losses caused by damage to the vessel
Marine Insurance
•A facility wherein the bank allows its current account holders to withdraw over and above the closing balance, uptoa
specified threshold.
Overdraft
•This card allows spending money uptothe balance in your account.
Debit Card
•It is a handheld device that reads banking cards.
Point of sales (PoS)
•The service for payment transactions in which Aadharnumber to be registered with the bank account.
AEPS –AadharEnabled Payment System
•Fastest possible money transfer system through banks
RTGS (real time gross settlement)
•Short term cash loan to the company wherein there is a limit uptowhich borrower can withdraw.
Cash Credit
•The type of account which encourages small collection of money of households.
Savings deposit account
•The type of account in which depositor deposits a fixed amount of money on an annuity basis for a fixed period.
Recurring deposit account
•An insurance policy for indemnifying the insured for losses caused by damage to the vessel
Marine Insurance
•A facility wherein the bank allows its current account holders to withdraw over and above the closing balance, uptoa
specified threshold.
Overdraft
•This card allows spending money uptothe balance in your account.
Debit Card
•It is a handheld device that reads banking cards.
Point of sales (PoS)
•The service for payment transactions in which Aadharnumber to be registered with the bank account.
AEPS –AadharEnabled Payment System
•Fastest possible money transfer system through banks
RTGS (real time gross settlement)
•Short term cash loan to the company wherein there is a limit uptowhich borrower can withdraw.
Cash Credit
•The type of account which encourages small collection of money of households.
Savings deposit account
•The type of account in which depositor deposits a fixed amount of money on an annuity basis for a fixed period.
Recurring deposit account
•MrKabirdesires to have two benefits from his bank account-First, to earn higher interest on
balance and second, to face the minimum risk of dishonouringa cheque. Which type of account
should be opened by him in the State Bank of India? Explain
Multiple option deposit account
•Life is full of uncertainties and to stress upon the importance of insurance. Bajaj Allianz Life
Insurance has carried out an insurance awareness road show called ‘Jan Jagariti’ across different
rural locations of Maharashtra, Goa and Gujarat. SubratMohanty, head of marketing, Bajaj Allianz
Life Insurance, said this was a campaign wherein a vehicle equipped with service support materials
and representatives goes out to places and a group of artists perform street play in the local
language.
The local people were made aware that on payment of a small periodic payment (premium), a large
possible risk can be covered. Insurance cannot stop the happening of a risk or event but can
compensate for losses arising out of it. Also, the loss shared by all persons exposed to it.
1.Identify the functions of insurance by quoting the lines from the above para.
2.Also name and explain the function of insurance not mentioned above.
ANS
1.Providingcertainty–“thelocalpeopleweremadeaware………………………riskcanbecovered.”
Protection–“insurancecannotstop…………………….lossesarisingoutofit”
Risksharing–“thelossessharedbyallpersonsexposedtoit”
2.Assistsincapitalformation
balance and second, to face the minimum risk of dishonouringa cheque. Which type of account
should be opened by him in the State Bank of India? Explain
Multiple option deposit account
•Life is full of uncertainties and to stress upon the importance of insurance. Bajaj Allianz Life
Insurance has carried out an insurance awareness road show called ‘Jan Jagariti’ across different
rural locations of Maharashtra, Goa and Gujarat. SubratMohanty, head of marketing, Bajaj Allianz
Life Insurance, said this was a campaign wherein a vehicle equipped with service support materials
and representatives goes out to places and a group of artists perform street play in the local
language.
The local people were made aware that on payment of a small periodic payment (premium), a large
possible risk can be covered. Insurance cannot stop the happening of a risk or event but can
compensate for losses arising out of it. Also, the loss shared by all persons exposed to it.
1.Identify the functions of insurance by quoting the lines from the above para.
2.Also name and explain the function of insurance not mentioned above.
ANS
1.Providingcertainty–“thelocalpeopleweremadeaware………………………riskcanbecovered.”
Protection–“insurancecannotstop…………………….lossesarisingoutofit”
Risksharing–“thelossessharedbyallpersonsexposedtoit”
2.Assistsincapitalformation
•Mr. Rajesh is employed in a branch of PNB in Delhi. His friend Vijay goes to the
bank very often. One day, Vijay goes to the bank to get a Bank Draft issued. There
he noticed that a customer of the bank told Rajesh that he wanted to transfer
40,000 rupees to Chandigarh immediately. Rajesh explained to him that it was
not possible to transfer the money immediately; it would be done after some
time. When some such cases of transfer would come, all of them would be
transferred in a batch. On another day, Vijay noticed that one of the bank
customers came and asked Rajesh if he could get 3 lakh transferred to Mumbai
immediately. Rajesh replied in affirmation. Vijay asked Rajesh why he refused to
transfer 40,000 rupees to Chandigarh. Vijay asked Rajesh why he refused to
transfer 40,000 to Chandigarh immediately that day, and how 3 lakh got
transferred to Mumbai immediately now. Rajesh explained this to Vijay, and he
was satisfied.
What explanation must have been given by Rajesh to Vijay?
ANS
RTGS and NEFT are the fast possible money transfer system through banks using
the internet facility provided by banks. (Explain both)
bank very often. One day, Vijay goes to the bank to get a Bank Draft issued. There
he noticed that a customer of the bank told Rajesh that he wanted to transfer
40,000 rupees to Chandigarh immediately. Rajesh explained to him that it was
not possible to transfer the money immediately; it would be done after some
time. When some such cases of transfer would come, all of them would be
transferred in a batch. On another day, Vijay noticed that one of the bank
customers came and asked Rajesh if he could get 3 lakh transferred to Mumbai
immediately. Rajesh replied in affirmation. Vijay asked Rajesh why he refused to
transfer 40,000 rupees to Chandigarh. Vijay asked Rajesh why he refused to
transfer 40,000 to Chandigarh immediately that day, and how 3 lakh got
transferred to Mumbai immediately now. Rajesh explained this to Vijay, and he
was satisfied.
What explanation must have been given by Rajesh to Vijay?
ANS
RTGS and NEFT are the fast possible money transfer system through banks using
the internet facility provided by banks. (Explain both)
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