Long Answer Questions
Question 1: What are services? Explain their distinct characteristics?
Answer: Services are intangible things which fulfill a customer need. A service is experienced by the consumer and for this the consumer needs to interact with the service provider mechanism. Following are the distinct characteristics of services:
Intangibility: Services are not physical entities and hence they cannot be touched or seen rather they can only be experienced. Since a service can only be experienced hence quality of a service cannot be determined unless someone consumes the service. For example; before getting treated by a doctor one cannot say if the treatment was good or bad.
Inconsistency: Since there is no standard tangible product involved so there is always inconsistency in the quality of service. A service has to be exclusively performed on each customer. Moreover, different customers have different needs and expectations. So, what may be a quality service for one customer may not be even satisfactory for another customer. For example; a daily wage labourer may be satisfied by getting a haircut at road-side barber shop. But a person from well to do family will opt for an up-market salon.
Inseparability: In a service there is simultaneous activity of production and consumption. A service cannot be produced for later use. A bar of soap can be manufactured today and can be sold at a later date. But a tutor has to deliver his lecture when the students are available to hear that lecture.
Inventory (less): A service is a perishable commodity, it cannot be stored for future use. This necessitates that demand of a service needs to be managed at that instance of time. A service needs to be performed when the customer demands it. It cannot be performed sooner or later.
Involvement: Customer involvement is inherent in service delivery process. Hence, a service always needs to be altered according to customer’s preferences.
Question 2: Explain the functions of commercial banks with an example of each.
Answer: Following are the functions of commercial banks:
- Acceptance of deposits: Banks accept deposits in various forms; like savings account, current account, term deposit, etc. Bank uses the deposits to lend money to a borrower. At the same time, banks also pay interest to the depositor. Thus, a bank is both a lender and a borrower.
- Lending of Funds: Banks offer loans to individuals and business establishments on particular rate of interest as prescribed by the RBI. Lending of funds is the source of income for banks. A person can avail car loan, housing loan or personal loan. Business establishments can avail short and long term loans from banks. By lending of funds, banks facilitate trade and commerce.
- Cheque Facility: Banks provide cheque facility to its customers. A cheque is a tool for paying money and paying through cheques is safe because cash is not involved in this transaction. A cheque is the most convenient and inexpensive means of exchange. There are two types of cheques, viz. bearer cheque and crossed cheque. A bearer cheque can be enchashed by the payee from any branch of the bank. A crossed cheque needs to be deposited in a bank account.
- Remittance of Fund: Banks also provide the facility of transferring money from one place to another. Now-a-days, because of internet money can be transferred in real time from one place to another; even from one country to another. Demand drafts are also used for transferring money from one place to another. However, demand draft needs to be physically presented to the concerned bank by the payee.
- Allied Services: Banks also provide some allied services like bill payment, locker facilities and underwriting services. Banks also provide DEMAT accounts through which one can buy or sell shares.
Question 3: Write a detailed note on various facilities offered by Indian Postal Department.
Answer: Various facilities offered by Indian Postal Department are as follows:
- Financial Facilities: The postal department offers financial services with many saving options. One can operate an account the way savings accounts are operated with a bank. Recurring Deposit and monthly income saving schemes are also available in post offices. Apart from that, saving instruments; like PPF (Public Provident Fund), Kisan Vikas Patra and National Saving Certificate (NSC) can be purchased from a post office.
- Mail Facilities: Mail facilities are the main task of postal department. Ordinary post, registered post and insured post are available. Registered post is used in cases where the sender wants the mail must be delivered. Insured post provides insurance for the dispatched item. The postal department also offers many allied services which are as follows:
- Greeting post: There is a range of greetings cards for various occasions.
- Media Post: The Indian corporate can avail this service. Under this service, advertisements can be put on envelopes, postcards, inland letters, etc. Advertisements can also be displayed through letter boxes. The postal department has reach in even the remotest parts of the country so advertising through media post can be a lucrative option for potential advertisers.
- Direct Post: This is used for direct advertising. It can be addressed or non-addressed.
- International Money Transfer: The postal department has a tie up with Western Union Money Transfer (a US based company). Under this service, person can send money to India from 185 countries. It is a fast and secure way of sending remittances.
- Passport Facilities: The postal department has a tie up with the Ministry of External Affairs. Under this agreement, postal department facilitates application for passport.
- Speed Post: Speed Post is a faster way of sending letters and documents throughout India. At present, Speed Post caters to over 1000 locations in India and to 97 major countries.
- E-bill Post: Under this service one can pay utility bills for BSNL and Airtel.
Question 4: Describe various types of insurance and examine the nature of risks protected by each type of insurance.
Answer: Different types of insurance are as follows:
Life Insurance: Human life is the subject matter of life insurance. It has the element of protection as well as that of investment. The insurable interest must be present at the time of effecting the policy but need not be necessary when the claim falls due. The life insurance policy usually exceeds one year and is usually taken for periods between 5 to 30 years and in some cases for the whole life. In case of a life insurance policy, loss is not measurable. The clause of indemnity does not apply to life insurance. One can insure for any amount in case of a life insurance policy. A life insurance policy has surrender value.
Fire Insurance: Any physical property can be the subject matter of fire insurance. It only has the element of protection and does not have the element of investment. The insurable interest must be present at the time of effecting the policy and also at the time when the claim falls due. A fire insurance policy usually does not exceed a year. A fire insurance policy has the clause of indemnity. The insurer can only claim the actual amount of loss caused by fire. Loss in case of fire insurance is measurable. Fire insurance does not have any surrender value. The insured amount cannot be more than the value of the insured item.
Marine Insurance: Ship, cargo or freight are the subject matter of marine insurance. It has only the element of protection. The insurable interest needs to be present only at the time when a claim falls due. The marine insurance policy is for one period of voyage or it can be mixed also. Marine insurance has the clause of indemnity. Loss is measurable in case of marine insurance and it has no surrender value. The insured amount shall be equal to the market value of ship, cargo or freight.
Question 5: Explain in detail the warehousing services.
Answer: Various types of warehousing services are as follows:
Private Warehouses: Private warehouses are operated, owned or leased by a company handling their own goods. For example; a retail chain or a big FMCG company may be having its own warehouse. A private warehouse facilitates control, flexibility and improved dealer relationship.
Public Warehouses: A public warehouse can be used by traders or any member of the public against the payment of a specified fee. The government issues licenses for public warehouses to private parties. Thus the government regulates the operation of these warehouses. The owner of the public warehouse has to take good care of goods. It also provides transportation facility. Public warehouse is highly beneficial for small traders who cannot afford to have their own warehouse. Public warehouse offers flexibility and cost effectiveness.
Bonded Warehouses: Bonded warehouses are the place where imported goods are held before import clearance is taken. The government issues licenses for such warehouses. An importer cannot remove goods until customs duty is paid. Some importers remove their consignments in small batches by paying customs duty accordingly. So, consignments may remain lying for long period in such warehouses. Due to this, the goods should be kept in good condition in these warehouses. Bonded warehouses facilitate entrepot trade.
Government Warehouses: These warehouses are fully owned by the government. Food Corporation of India, State Trading Corporation, Central Warehousing Corporation are the public sector organizations which manage government warehouses.
Cooperative Warehouses: Many cooperative societies maintain their own warehouses. These warehouses are meant to serve the members of the cooperative society.