NCERT Textbook - Business Services | Business Studies (BST) Class 11 - Commerce PDF Download

 Page 1


Chapter 4
Business s ervices LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the characteristics of services;
•	
distinguish services from goods;
•	
classify different types of business services;
•	
explain the concept of e-banking;
•	
identify and classify different types of insurance policies; and
•	
describe different types of warehouses.
Chapter 4.indd   79 31-12-2020   11:55:08
2024-25
Page 2


Chapter 4
Business s ervices LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the characteristics of services;
•	
distinguish services from goods;
•	
classify different types of business services;
•	
explain the concept of e-banking;
•	
identify and classify different types of insurance policies; and
•	
describe different types of warehouses.
Chapter 4.indd   79 31-12-2020   11:55:08
2024-25
80 BUSINESS  STUDIES
4.1 i ntroduction You must all have, at some time or the 
other experienced the effect of business 
activities on your lives. Let us examine 
few examples of business activity i.e., 
purchasing ice cream from a store 
and eating ice cream in a restaurant, 
watching a movie in a cinema hall 
purchasing a school bus and leasing 
it from a transporter. If you analyse 
all these activities, you will observe 
that there is a difference between 
purchasing and eating, purchasing 
and watching and purchasing and 
leasing. What is common in all of them 
is that one is purchasing an item and 
the other is experiencing a service. But 
there 	 is 	 definitely 	 a 	 difference 	 between	
the item or good and the service 
performed.
For a layperson, services are 
essentially intangibles. Their purchase 
does not result in the ownership of 
anything physical. For example, you 
can only seek advice from the doctor, 
you cannot purchase him. Services are 
all those economic activities that are 
intangible and imply an interaction to 
be realised between 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.
A good is a physical product capable 
of being delivered to a purchaser and 
All of us have seen a petrol pump. Have your ever thought how a petrol pump 
owner does his business in a village? How he gets the petrol and diesel to the 
villages in the interior? How he gets the money to purchase large quantities of 
petrol and diesel? How he communicates to petrol depots for requirement and 
also to customers? How he safeguards himself from various risks associated with 
this business? The answer to all the above questions lies in the understanding 
of	 business	 services. 	 The 	 transportation 	 of 	 petrol	 and 	 diesel	 from	 oil 	 refineries 	 to 	
petrol pumps is carried out by train and tankers (transport services).  They are 
then stored at various depots of oil companies situated in all major towns across 
India (warehousing services). Petrol pump owners use postal, mail and telephone 
facilities to be in touch with customers, banks and the depots for the availability 
of their requirements on regular basis (communication services). As oil companies 
always sell the petrol and diesel on advance payment, the owners have to take 
loans and advances from banks to fund their purchases (banking services). Petrol 
and diesel being highly risky products, the owners have to safeguard themselves 
from various risks by getting the business, the products, the life of people working 
there, etc., insure (insurance services). Thus, we see that a single business of 
providing petrol and diesel at a petrol pump is actually a collective outcome of 
various business services. These services are being utilised in the entire process 
of	 shipment 	 of	 petrol	 and 	 diesel 	 from	 oil	 refineries 	 to	 the 	 point	 of 	 sale 	 at	 petrol	
pumps, spread across the length and breath of India.
Chapter 4.indd   80 31-12-2020   11:55:08
2024-25
Page 3


Chapter 4
Business s ervices LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the characteristics of services;
•	
distinguish services from goods;
•	
classify different types of business services;
•	
explain the concept of e-banking;
•	
identify and classify different types of insurance policies; and
•	
describe different types of warehouses.
Chapter 4.indd   79 31-12-2020   11:55:08
2024-25
80 BUSINESS  STUDIES
4.1 i ntroduction You must all have, at some time or the 
other experienced the effect of business 
activities on your lives. Let us examine 
few examples of business activity i.e., 
purchasing ice cream from a store 
and eating ice cream in a restaurant, 
watching a movie in a cinema hall 
purchasing a school bus and leasing 
it from a transporter. If you analyse 
all these activities, you will observe 
that there is a difference between 
purchasing and eating, purchasing 
and watching and purchasing and 
leasing. What is common in all of them 
is that one is purchasing an item and 
the other is experiencing a service. But 
there 	 is 	 definitely 	 a 	 difference 	 between	
the item or good and the service 
performed.
For a layperson, services are 
essentially intangibles. Their purchase 
does not result in the ownership of 
anything physical. For example, you 
can only seek advice from the doctor, 
you cannot purchase him. Services are 
all those economic activities that are 
intangible and imply an interaction to 
be realised between 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.
A good is a physical product capable 
of being delivered to a purchaser and 
All of us have seen a petrol pump. Have your ever thought how a petrol pump 
owner does his business in a village? How he gets the petrol and diesel to the 
villages in the interior? How he gets the money to purchase large quantities of 
petrol and diesel? How he communicates to petrol depots for requirement and 
also to customers? How he safeguards himself from various risks associated with 
this business? The answer to all the above questions lies in the understanding 
of	 business	 services. 	 The 	 transportation 	 of 	 petrol	 and 	 diesel	 from	 oil 	 refineries 	 to 	
petrol pumps is carried out by train and tankers (transport services).  They are 
then stored at various depots of oil companies situated in all major towns across 
India (warehousing services). Petrol pump owners use postal, mail and telephone 
facilities to be in touch with customers, banks and the depots for the availability 
of their requirements on regular basis (communication services). As oil companies 
always sell the petrol and diesel on advance payment, the owners have to take 
loans and advances from banks to fund their purchases (banking services). Petrol 
and diesel being highly risky products, the owners have to safeguard themselves 
from various risks by getting the business, the products, the life of people working 
there, etc., insure (insurance services). Thus, we see that a single business of 
providing petrol and diesel at a petrol pump is actually a collective outcome of 
various business services. These services are being utilised in the entire process 
of	 shipment 	 of	 petrol	 and 	 diesel 	 from	 oil	 refineries 	 to	 the 	 point	 of 	 sale 	 at	 petrol	
pumps, spread across the length and breath of India.
Chapter 4.indd   80 31-12-2020   11:55:08
2024-25
81 BUSINESS SERVICES
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.
4.2 n ature of s ervices Ther e 	 ar e 	 five 	 bas i c 	 f e at ur es 	 of 	 s er v i c es .	
These features also distinguish them 
from goods and are known as the 
five 	 Is	 of 	 services. 	 These 	 are 	 discussed	
as below:
(i) Intangibility: Services are 
intangible, i.e., they cannot be touched. 
They are experiential in nature. One 
cannot taste a doctor’s treatment, 
or touch entertainment. One can 
only experience it. An important 
implication of this is that quality of 
the offer can often not be determined 
before consumption and, therefore, 
purchase. It is, therefore, important 
for the service providers that they 
consciously work on creating a desired 
service so that the customer undergoes 
a favourable experience. For example, 
treatment by a doctor should be a 
favourable experience.
(ii) Inconsistency: The second 
important characteristic of services 
is inconsistency. Since there is no 
standard tangible product, services 
have to be performed exclusively 
each time. Different customers have 
different demands and expectations. 
Service providers need to have an 
opportunity to alter their offer to 
closely meet the requirements of the 
customers. This is happening, for 
example, in the case of mobile services.
(iii) Inseparability:    Another 
important characteristic of services 
is the simultaneous activity of 
production and consumption being 
performed. This makes the production 
and consumption of services seem 
to be inseparable. While we can 
manufacture a car today and sell 
it after, say, a month; this is often 
not possible with services that have 
to be consumed as and when they 
are produced. Service providers may 
design a substitute for the person by 
using appropriate technology but the 
interaction with the customer remains 
a key feature of services. Automated 
Teller Machines (ATMs) may replace 
the	 banking	 clerk	 for	 the	 front	 office 	
activities like cash withdrawal and 
cheque deposit. But, at the same 
time, the presence of the customer, is 
required and his/her interaction with 
the process has to be managed.
(iv) Inventory (Less): Services have 
little or no tangible components 
and, therefore, cannot be stored for 
a future use. That is, services are 
perishable and providers can, at best, 
store some associated goods but not 
the service itself. This means that 
the demand and supply needs to be 
managed as the service has to be 
performed as and when the customer 
asks for it. They cannot be performed 
earlier to be consumed at a later date. 
For example, a railway ticket can be 
stored but the railway journey will be 
experienced only when the railways 
provides it.
Chapter 4.indd   81 31-12-2020   11:55:08
2024-25
Page 4


Chapter 4
Business s ervices LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the characteristics of services;
•	
distinguish services from goods;
•	
classify different types of business services;
•	
explain the concept of e-banking;
•	
identify and classify different types of insurance policies; and
•	
describe different types of warehouses.
Chapter 4.indd   79 31-12-2020   11:55:08
2024-25
80 BUSINESS  STUDIES
4.1 i ntroduction You must all have, at some time or the 
other experienced the effect of business 
activities on your lives. Let us examine 
few examples of business activity i.e., 
purchasing ice cream from a store 
and eating ice cream in a restaurant, 
watching a movie in a cinema hall 
purchasing a school bus and leasing 
it from a transporter. If you analyse 
all these activities, you will observe 
that there is a difference between 
purchasing and eating, purchasing 
and watching and purchasing and 
leasing. What is common in all of them 
is that one is purchasing an item and 
the other is experiencing a service. But 
there 	 is 	 definitely 	 a 	 difference 	 between	
the item or good and the service 
performed.
For a layperson, services are 
essentially intangibles. Their purchase 
does not result in the ownership of 
anything physical. For example, you 
can only seek advice from the doctor, 
you cannot purchase him. Services are 
all those economic activities that are 
intangible and imply an interaction to 
be realised between 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.
A good is a physical product capable 
of being delivered to a purchaser and 
All of us have seen a petrol pump. Have your ever thought how a petrol pump 
owner does his business in a village? How he gets the petrol and diesel to the 
villages in the interior? How he gets the money to purchase large quantities of 
petrol and diesel? How he communicates to petrol depots for requirement and 
also to customers? How he safeguards himself from various risks associated with 
this business? The answer to all the above questions lies in the understanding 
of	 business	 services. 	 The 	 transportation 	 of 	 petrol	 and 	 diesel	 from	 oil 	 refineries 	 to 	
petrol pumps is carried out by train and tankers (transport services).  They are 
then stored at various depots of oil companies situated in all major towns across 
India (warehousing services). Petrol pump owners use postal, mail and telephone 
facilities to be in touch with customers, banks and the depots for the availability 
of their requirements on regular basis (communication services). As oil companies 
always sell the petrol and diesel on advance payment, the owners have to take 
loans and advances from banks to fund their purchases (banking services). Petrol 
and diesel being highly risky products, the owners have to safeguard themselves 
from various risks by getting the business, the products, the life of people working 
there, etc., insure (insurance services). Thus, we see that a single business of 
providing petrol and diesel at a petrol pump is actually a collective outcome of 
various business services. These services are being utilised in the entire process 
of	 shipment 	 of	 petrol	 and 	 diesel 	 from	 oil	 refineries 	 to	 the 	 point	 of 	 sale 	 at	 petrol	
pumps, spread across the length and breath of India.
Chapter 4.indd   80 31-12-2020   11:55:08
2024-25
81 BUSINESS SERVICES
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.
4.2 n ature of s ervices Ther e 	 ar e 	 five 	 bas i c 	 f e at ur es 	 of 	 s er v i c es .	
These features also distinguish them 
from goods and are known as the 
five 	 Is	 of 	 services. 	 These 	 are 	 discussed	
as below:
(i) Intangibility: Services are 
intangible, i.e., they cannot be touched. 
They are experiential in nature. One 
cannot taste a doctor’s treatment, 
or touch entertainment. One can 
only experience it. An important 
implication of this is that quality of 
the offer can often not be determined 
before consumption and, therefore, 
purchase. It is, therefore, important 
for the service providers that they 
consciously work on creating a desired 
service so that the customer undergoes 
a favourable experience. For example, 
treatment by a doctor should be a 
favourable experience.
(ii) Inconsistency: The second 
important characteristic of services 
is inconsistency. Since there is no 
standard tangible product, services 
have to be performed exclusively 
each time. Different customers have 
different demands and expectations. 
Service providers need to have an 
opportunity to alter their offer to 
closely meet the requirements of the 
customers. This is happening, for 
example, in the case of mobile services.
(iii) Inseparability:    Another 
important characteristic of services 
is the simultaneous activity of 
production and consumption being 
performed. This makes the production 
and consumption of services seem 
to be inseparable. While we can 
manufacture a car today and sell 
it after, say, a month; this is often 
not possible with services that have 
to be consumed as and when they 
are produced. Service providers may 
design a substitute for the person by 
using appropriate technology but the 
interaction with the customer remains 
a key feature of services. Automated 
Teller Machines (ATMs) may replace 
the	 banking	 clerk	 for	 the	 front	 office 	
activities like cash withdrawal and 
cheque deposit. But, at the same 
time, the presence of the customer, is 
required and his/her interaction with 
the process has to be managed.
(iv) Inventory (Less): Services have 
little or no tangible components 
and, therefore, cannot be stored for 
a future use. That is, services are 
perishable and providers can, at best, 
store some associated goods but not 
the service itself. This means that 
the demand and supply needs to be 
managed as the service has to be 
performed as and when the customer 
asks for it. They cannot be performed 
earlier to be consumed at a later date. 
For example, a railway ticket can be 
stored but the railway journey will be 
experienced only when the railways 
provides it.
Chapter 4.indd   81 31-12-2020   11:55:08
2024-25
82 BUSINESS  STUDIES
(v) Involvement: One of the most 
important characteristics of services 
is the participation of the customer 
in the service delivery process. A 
customer has the opportunity to get 
the services modified according to 
specific 	 requirements.
4.2.1 Difference between Services 
and Goods
From the above, it is clear that the two 
main differentiating characteristics 
of services and goods are non- 
transferability of ownership and 
presence of both provider as well as 
consumer. While goods are produced, 
services are performed. A service is 
an act which cannot be taken home. 
What we can take home is the effect 
of the services. And as the services are 
sold at the consumption point, there 
are no inventories. On the basis of 
above features, we can have following 
points of distinction between goods 
and services.
4.3 t ypes of s ervices When speaking of the service sector, 
services 	 can 	 be 	 classified 	 into 	 three	
broad categories, viz., business 
services, social services and personal 
services. These have been explained in 
the following pages.
(i) Business Services: Business 
services are those services which are 
used by business enterprises for the 
conduct of their activities. For example, 
banking, insurance, transportation, 
warehousing  and communication 
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 Homogenous
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
Difference between Services and Goods
Chapter 4.indd   82 31-12-2020   11:55:08
2024-25
Page 5


Chapter 4
Business s ervices LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
state the characteristics of services;
•	
distinguish services from goods;
•	
classify different types of business services;
•	
explain the concept of e-banking;
•	
identify and classify different types of insurance policies; and
•	
describe different types of warehouses.
Chapter 4.indd   79 31-12-2020   11:55:08
2024-25
80 BUSINESS  STUDIES
4.1 i ntroduction You must all have, at some time or the 
other experienced the effect of business 
activities on your lives. Let us examine 
few examples of business activity i.e., 
purchasing ice cream from a store 
and eating ice cream in a restaurant, 
watching a movie in a cinema hall 
purchasing a school bus and leasing 
it from a transporter. If you analyse 
all these activities, you will observe 
that there is a difference between 
purchasing and eating, purchasing 
and watching and purchasing and 
leasing. What is common in all of them 
is that one is purchasing an item and 
the other is experiencing a service. But 
there 	 is 	 definitely 	 a 	 difference 	 between	
the item or good and the service 
performed.
For a layperson, services are 
essentially intangibles. Their purchase 
does not result in the ownership of 
anything physical. For example, you 
can only seek advice from the doctor, 
you cannot purchase him. Services are 
all those economic activities that are 
intangible and imply an interaction to 
be realised between 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.
A good is a physical product capable 
of being delivered to a purchaser and 
All of us have seen a petrol pump. Have your ever thought how a petrol pump 
owner does his business in a village? How he gets the petrol and diesel to the 
villages in the interior? How he gets the money to purchase large quantities of 
petrol and diesel? How he communicates to petrol depots for requirement and 
also to customers? How he safeguards himself from various risks associated with 
this business? The answer to all the above questions lies in the understanding 
of	 business	 services. 	 The 	 transportation 	 of 	 petrol	 and 	 diesel	 from	 oil 	 refineries 	 to 	
petrol pumps is carried out by train and tankers (transport services).  They are 
then stored at various depots of oil companies situated in all major towns across 
India (warehousing services). Petrol pump owners use postal, mail and telephone 
facilities to be in touch with customers, banks and the depots for the availability 
of their requirements on regular basis (communication services). As oil companies 
always sell the petrol and diesel on advance payment, the owners have to take 
loans and advances from banks to fund their purchases (banking services). Petrol 
and diesel being highly risky products, the owners have to safeguard themselves 
from various risks by getting the business, the products, the life of people working 
there, etc., insure (insurance services). Thus, we see that a single business of 
providing petrol and diesel at a petrol pump is actually a collective outcome of 
various business services. These services are being utilised in the entire process 
of	 shipment 	 of	 petrol	 and 	 diesel 	 from	 oil	 refineries 	 to	 the 	 point	 of 	 sale 	 at	 petrol	
pumps, spread across the length and breath of India.
Chapter 4.indd   80 31-12-2020   11:55:08
2024-25
81 BUSINESS SERVICES
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.
4.2 n ature of s ervices Ther e 	 ar e 	 five 	 bas i c 	 f e at ur es 	 of 	 s er v i c es .	
These features also distinguish them 
from goods and are known as the 
five 	 Is	 of 	 services. 	 These 	 are 	 discussed	
as below:
(i) Intangibility: Services are 
intangible, i.e., they cannot be touched. 
They are experiential in nature. One 
cannot taste a doctor’s treatment, 
or touch entertainment. One can 
only experience it. An important 
implication of this is that quality of 
the offer can often not be determined 
before consumption and, therefore, 
purchase. It is, therefore, important 
for the service providers that they 
consciously work on creating a desired 
service so that the customer undergoes 
a favourable experience. For example, 
treatment by a doctor should be a 
favourable experience.
(ii) Inconsistency: The second 
important characteristic of services 
is inconsistency. Since there is no 
standard tangible product, services 
have to be performed exclusively 
each time. Different customers have 
different demands and expectations. 
Service providers need to have an 
opportunity to alter their offer to 
closely meet the requirements of the 
customers. This is happening, for 
example, in the case of mobile services.
(iii) Inseparability:    Another 
important characteristic of services 
is the simultaneous activity of 
production and consumption being 
performed. This makes the production 
and consumption of services seem 
to be inseparable. While we can 
manufacture a car today and sell 
it after, say, a month; this is often 
not possible with services that have 
to be consumed as and when they 
are produced. Service providers may 
design a substitute for the person by 
using appropriate technology but the 
interaction with the customer remains 
a key feature of services. Automated 
Teller Machines (ATMs) may replace 
the	 banking	 clerk	 for	 the	 front	 office 	
activities like cash withdrawal and 
cheque deposit. But, at the same 
time, the presence of the customer, is 
required and his/her interaction with 
the process has to be managed.
(iv) Inventory (Less): Services have 
little or no tangible components 
and, therefore, cannot be stored for 
a future use. That is, services are 
perishable and providers can, at best, 
store some associated goods but not 
the service itself. This means that 
the demand and supply needs to be 
managed as the service has to be 
performed as and when the customer 
asks for it. They cannot be performed 
earlier to be consumed at a later date. 
For example, a railway ticket can be 
stored but the railway journey will be 
experienced only when the railways 
provides it.
Chapter 4.indd   81 31-12-2020   11:55:08
2024-25
82 BUSINESS  STUDIES
(v) Involvement: One of the most 
important characteristics of services 
is the participation of the customer 
in the service delivery process. A 
customer has the opportunity to get 
the services modified according to 
specific 	 requirements.
4.2.1 Difference between Services 
and Goods
From the above, it is clear that the two 
main differentiating characteristics 
of services and goods are non- 
transferability of ownership and 
presence of both provider as well as 
consumer. While goods are produced, 
services are performed. A service is 
an act which cannot be taken home. 
What we can take home is the effect 
of the services. And as the services are 
sold at the consumption point, there 
are no inventories. On the basis of 
above features, we can have following 
points of distinction between goods 
and services.
4.3 t ypes of s ervices When speaking of the service sector, 
services 	 can 	 be 	 classified 	 into 	 three	
broad categories, viz., business 
services, social services and personal 
services. These have been explained in 
the following pages.
(i) Business Services: Business 
services are those services which are 
used by business enterprises for the 
conduct of their activities. For example, 
banking, insurance, transportation, 
warehousing  and communication 
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 Homogenous
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
Difference between Services and Goods
Chapter 4.indd   82 31-12-2020   11:55:08
2024-25
83 BUSINESS SERVICES
(ii) 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.
(iii) 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.
In the context of better 
understanding of the business 
world, we will be limiting our 
further 	 discussions 	 to 	 the 	 first 	 category	
of the service sector i.e., business 
services.
4.3.1 Business Services
Today’s world is of tough competition, 
where the survival of the fittest is 
the rule. There is no room for non-
performance, and hence companies 
tend to stick to what they can do best. 
In order to be competitive, business 
enterprises, are becoming more 
and more dependant on specialised 
business services. Business enterprises 
look towards banks for availability 
of funds; insurance companies for 
getting their plant, machinery, goods, 
etc., insured; transport companies for 
t r anspor t i ng 	 raw 	 mat er i al ; 	 and 	 fini shed 	
goods, and telecom and postal services 
for being in touch with their vendors, 
suppliers and customers. Today’s 
globalised world has ushered in a 
rapid change in the service industry in 
India. India has been gaining a highly 
competitive edge over other countries 
when it comes to providing services to 
the developed economies of the world. 
Many foreign companies are looking to 
India for performing a host of business 
services. They are even transferring a 
part of their business operations to 
be performed in India. We will discuss 
these in detail in the next chapter.
4.4 Banking Commercial banks are an important 
institution of the economy for providing 
institutional credit to its customers. 
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 withdrawable by cheques, draft, 
order or otherwise. In simple terms, 
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 mobilises 
the savings of people and makes funds 
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