Q. 1. What are services? Explain their distinct characteristics. (DDE)
Ans. Service are identifiable and intangible economy activity that provide satisfaction of human wants.
(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.
(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.
(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.
(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.
(v) Involvement: One of the most important characteristics of services is the participation of the customer in the service delivery process.
Q. 2. Explain the main services of commercial banks. (KVS Agra 2017) (KVS 2015)
Explain the functions of commercial banks. (KVS 2013) (NCT 2010)
Ans. The main functions of commercial banks are described below:
(i) Collection of deposits: One of the basic and primary functions of commercial banks is that they accept deposits from their clients. The depositors can withdraw money from their accounts in the form of cash or through cheques and drafts.
(ii) Granting loans: Banks grant loans to industry, trade and commerce. The banks lend the money which they get in the form of deposits. The funds lent out by banks help in the development of trade and industry.
(iii) Collection of cheques and bills: Banks collect the cheques for their customers drawn on other banks. To collect cheques, banks have clearing houses. In case of local houses, the banks take no extra charges. For collecting outstation cheques, banks charge a commission. Banks also accept bills of exchange and encash those by charging a commission called discount before the maturity date.
(iv) Agency functions: Banks pay insurance premium on behalf of their clients. They also collect dividend, premium, interest, pension, etc. on behalf of customers and credit the same in their accounts.
(v) Custodial services: Commercial banks act as custodians by providing protection to the valuable articles of their clients.
(vi) Issue of letter of credit: Letter of credit is a very important document in external trade. It gives assurance of payment on behalf of the importer. The letter of credit is issued by the importer’s bank to the exporter’s bank to give assurance of payment on delivery of goods in the importer’s country.
Q. 3. Define e-banking. Explain the various types of bank accounts. (KVS Agra 2016)
The relationship between a bank and a customer begins when the customer opens an account with the bank. In context to this statement, discuss some of the accounts that can be opened by a customer in banks.
Ans. e-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 banks services. There is no human operator to respond to the needs of the customer.
Types of Bank Accounts are:
(i) Saving Deposit Account: A person can open a savings deposit account by depositing a small sum of money. He can deposit money and withdraw money from his account whenever required.
(ii) Current Deposit Account: The account holder can deposit and withdraw money whenever desired. This account is generally opened by the businessman.
(iii) Fixed Deposit Account: A fixed deposit is repayable after the expiry of the specified period of time. The period may vary from 6 months to 5 years.
(iv) Recurring deposit Account: In this account money is deposited in regular instalments of a specified time period.
(v) Multiple deposit: It offers benefits of current account option and savings account to the depositor.
Q. 4. Describe the various services offered by e-banking. (NCT 2011)
Ans. The services offered by e-banking are as follows:
(i) ATM (Automated Teller Machine): It is a selfservice terminal which can be operated at any time i.e. 24 hours a day. To use an ATM, a client has to insert a plastic card in the machine and enter his identification code. If the code is appropriate, the machine would respond by providing cash, accepting deposits, etc.
(ii) Debit card: Debit card facility is offered to the account holders to make payment up to the amount of credit balance available in their account. It is generally located in sale terminals (shop/store) which are tied up electronically to the bank computer. When the customer presents the debit card, the amount is automatically transferred from the customer’s bank account to the seller’s account.
(iii) Credit card: It refers to a card which permits overdraft facility to the clients depending upon their credit worthiness. Through this the customer can purchase products by presenting the credit card. It is an important type of support service provided by the banks.
(iv) On-line payment: It also offers the facility of making online payment of bills, taxes, etc.
Q. 5. Discuss the various principles of insurance. (KVS Agra)
Discuss the following principles of Contract of Insurance:
(i) Principle of Indemnity
(ii) Principle of Subrogation
(iii) Principle of Contribution (KVS Agra 2016)
Explain any four principles of Insurance. (KVS 2015) (KVS 2013)
Ans. (i) Utmost good faith: It is the duty of the applicant to disclose all the material facts relating to risk to be covered. A material fact refers to the fact which would influence the mind of a prudent underwriter in deciding whether to accept a risk for insurance and on what terms.
(ii) Indemnity: The purpose of insurance is to restore the insured person to approximately the same financial position that existed prior to the loss. The losses paid here would be approximately the same and the reason for this is to prevent the insured from profiting from insurance to reduce moral hazards. Indemnity can be defined as the compensation of loss or injury sustained.
(iii) Mitigation: It is the duty of the insured to take reasonable steps to minimise the loss or damage to the insured property. If reasonable care is not taken like any prudent person then the claim from the insurance company may be lost.
(iv) Subrogation: Subrogation refers to transfer of rights and remedies for the insured to the insurer who has indemnified the insured in respect of the loss.
(v) Insurable interest: The person getting an insurance policy must have an insurable interest in the property or life insured. A person is said to have an insurable interest in the property if he is benefited by its existence and prejudiced by its destruction.Without insurable interest, the insurance contract is void.
(vi) Contribution: The principle of contribution allows the insurer the right to call on other insurers liable for the cost to share the claim payment.
(vii) Proximate cause: An insurer will only be liable to pay a claim under an insurance contract if the loss which gives rise to the claim was proximately caused by an insured peril. This means that the loss must be directly attributed to an insured peril without any break in the chain of causation.