Batch 2025-26 Chapter 4 - Business Services

A set of Q&A style flashcards covering the key concepts from Batch 2025-26 Chapter 4 on Business Services, including banking, e-banking, and insurance concepts and principles.

What are business services?

Services used by business enterprises for the smooth conduct of activities; examples include banking, insurance, transportation, warehousing, and communication services.

What is the Banking definition according to the Indian Banking Regulation Act 1949?

Banking is the business of accepting, for the purpose of lending or investment, deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise.

What are the main types of bank accounts mentioned?

Savings, Current, Fixed Deposits, Recurring Deposits, and Multiple Option Deposit Account.

What is a Bank Draft?

A financial instrument through which money can be remitted; drawn by one bank on another bank; the bank may charge a commission on its issue.

What is a Bank Overdraft?

A facility to withdraw more money from a current account than is available, available only for current account holders.

What is Cash Credit?

A facility to withdraw money from a current account without a credit balance, up to a fixed borrowing limit; interest is charged on the running balance.

What is E-Banking?

Electronic banking or virtual banking; banking via the internet with a centralized web-connected database; services include ATM, credit card, EFT, and PoS.

What are the benefits of E-Banking for customers?

Access transactions from home/office/travel, helps record transactions, 24/7/365 service, and enhanced security by reducing cash handling.

What are the benefits of E-Banking for banks?

Competitive advantage, unlimited networking beyond branches, centralized database reduces branch load, and improved efficiency.

What is Bank Draft in more detail?

A draft drawn by one bank on another bank, authorizing payment to the named person; the issuer bank may charge a commission.

What is Banker’s Cheque (Pay Order)?

A bank document instructing payment to a third party with a guarantee of payment; payable within the city and usually with lower charges than a bank draft.

What is Real Time Gross Settlement (RTGS)?

A fund transfer system where money or securities are transferred in real time on a gross (one-to-one) basis; payments are final and irrevocable; RBI controls it; minimum value is Rs. 2,00,000.

What is National Electronic Funds Transfer (NEFT)?

A system for direct fund transfer from one account to another; no minimum value requirement; settlement is net-based.

What is the key difference between RTGS and NEFT?

RTGS is gross settlement; NEFT is net settlement.

What is the minimum amount for RTGS?

Rs. 2,00,000.

What are the two types of cheques discussed?

Bearer cheque and Crossed cheque.

What is Remittance of funds?

Facility of transferring funds from one place to another using instruments like bank draft or pay orders.

What are some important services provided by banks?

Bank Draft, Banker’s Cheque/Pay Order, RTGS, NEFT, bank overdraft, e-banking, and related account services.

What is the meaning of Insurance?

A contract where one party (insurer) agrees to pay compensation for a loss in exchange for a premium; spreads risk among many exposed to it.

What are the general functions of Insurance?

Provides certainty and security, protects against loss, shares risk, and assists in capital formation.

What is Utmost Good Faith?

Auberrimae fidei; both insurer and insured must disclose all material information; example: non-disclosure can void a claim.

What is Insurable Interest?

A pecuniary interest in the subject matter of insurance; need not be the owner; must exist to insure.

What is Indemnity in insurance?

Most non-life contracts restore the insured to the pre-loss position; payout up to the actual loss value.

What is Proximate Cause?

When multiple causes contribute to a loss, the direct and most dominant cause is considered; remote causes are not covered.

What is Subrogation?

After compensation, ownership of the insured property passes to the insurer; insured cannot profit from the loss.

What is Contribution in insurance?

If multiple insurers cover the same risk, they share the loss in proportion to the insured amounts; if one pays fully, others may not pay.

What is Mitigation in insurance?

The insured must take reasonable steps to minimize loss; failing to do so can void the claim.

What are the main types of insurance based on subject matter?

Life Insurance, Fire Insurance, Marine Insurance.

What is insurable interest in Life Insurance?

Insurable interest must be present at the time of taking the policy.

What is insurable interest in Fire Insurance?

Insurable interest must be present both at the time of taking the policy and when the claim falls due.

What is insurable interest in Marine Insurance?

Insurable interest must be present when the claim falls due.

What is the typical duration of Life Insurance?

Usually exceeds 1 year.

What is the typical duration of Fire Insurance?

Does not exceed one year.

What is the typical duration of Marine Insurance?

1 year or period of voyage or mixed.

How is Loss measured in Life Insurance?

Loss cannot be measured in terms of money (in life insurance context).

How is Loss measured in Fire Insurance?

Loss can be measured in terms of money (financial loss).

How is Loss measured in Marine Insurance?

Loss can be measured in terms of money (economic loss to ship/cargo).

What is Surrender Value in life insurance?

Life insurance policies may be surrendered for a surrender value; fire and marine policies generally do not have surrender value.

What is the policy amount rule for Life Insurance?

Can insure for any amount.

What is the policy amount rule for Fire Insurance?

Policy amount cannot exceed the value of the subject matter.

What is the policy amount rule for Marine Insurance?

Policy amount can be the market value of the ship or cargo.

What is the contingency of risk in Life Insurance?

There is an element of certainty; the event (death/maturity) is bound to happen and a claim is expected.

What is the contingency of risk in Fire Insurance?

There is an element of uncertainty; the loss may or may not occur, so a claim is not guaranteed.

What is the contingency of risk in Marine Insurance?

There is an element of uncertainty; loss at sea may occur or may not, leading to possible claims.