BUSINESS SUPPORT SERVICES Module - 1
Introduction to Business
2
Note
BUSINESS SUPPORT SERVICES
Have you ever observed the various activities performed by a businessman while
carrying out the business operations? Look at the grocery shop of your locality. What
does the owner do? He arranges funds, buys goods from the main market, carries
those goods to his shop, stores them systematically and sells to the customers as per
their demand. While doing all these activities the owner or the businessman needs
various help or support from others. For example, he may take a loan from the bank,
hire a tempo or truck in carrying the goods and so on. Thus, to carry out any business
activity successfully various support services are required. Let us learn about these
services and their operations. In this lesson we shall learn about the basic aspects like
the meaning, importance and functioning of these support services.
LEARNING OUTCOMES
describes different types of support services;
discusses the importance of these support services for a business; and
applies a right mix of support services for a particular business.
2.1 BUSINESS SUPPORT SERVICES
Business requires support right from the purchase of raw material to delivery of
products.The services that help in this smooth flow are labeled to as business support
services or support services of business. Business support services refer to those
business activities that act as auxiliaries to trade and facilitate smooth flow of goods
from producer to consumer and the functioning of business as such.These include a
wide variety of services like banking, insurance, transportation, warehousing and
Business studies (319) Senior Secondary 27
, Module - 1 BUSINESS SUPPORT SERVICES
Introduction to Business communication. Banking helps in providing finance and payment facilities, insurance to
provide a cover to all sorts of business risks, transportation to facilitate physical
movement of goods from one place to another, warehousing to provide storage facilities
at various places to meet seasonal variations in demand, and communication for
facilitating exchange of information and ideas between producers, middlemen and
Note consumers. Thus, effectively, these business services are essential for the smooth
functioning of any business in any part of the world, and every person who is engaged
in business must be fully aware of their functioning and use. Let us now learn about
each one of these in detail.
2.1.2 TYPES OF SUPPORT SERVICES
The services used by business organisations for the conduct of their activities are the
support services and include:
Banking
Insurance
Transportation
Communication
Warehousing
2.2 BANKING
Bank is an institution that deals in money and credit. It accepts deposits from those
who have funds to spare and grants loans and advances to those who are in need of
funds for various purposes. Thus, banking refers to the various services provided by
banks, such as acceptance of deposits, grant of loans and advances, and other
supplementary services. Banking Regulation Act defines banking as "accepting, for
the purpose of lending or investment of deposits of money from the public repayable
on demand or/and withdrawable by cheque, draft or otherwise". Thus, acceptance of
deposits and lending or investing the same are two essential functions of a bank which
acts as an intermediary and deals with money belonging to the public. In addition, it
provides for a whole lot of other financial services which we will learn in the later part
of the chapter.
28 Business studies (319) Senior Secondary
,BUSINESS SUPPORT SERVICES Module - 1
Indigenous banking system: The exchange and barter system has been Introduction to Business
prevalent in India from earlier times. There were varied types of coins and
weighing practices used at different places. As the economic life progressed,
metals replaced other means because of its uniformity and durability.
Documents such as 'Hundi' and 'Chitti' were in use for carrying out
transactions where money was a medium of exchange. Note
2.2.1 IMPORTANCE OF BANKING
(a) Capital Formation: Deposits accepted by banks are channelised as loans and
advances for industrial and trading activities to business organisations. Thus,
banking indirectly converts savings into investment leading to capital formation
and development of economy.
(b) Services to Business: Banking helps business through a variety of services
such as providing long-term and short-term finance, arranging remittance of
money, collection of cheques and bills etc., assisting in raising of capital by acting
as underwriters and merchant bankers and so on.
(c) Reduces Use of Currency: Banks enable depositors to make payment by
cheque, which is transferable by endorsement and delivery. Besides payments
also can be made through debit cards, credit cards etc. issued by banks instead
of liquid money. Thus, use of currency is considerably reduced.
(d) Mobilisation of Savings: Banks allow savings to be deposited in different
types of accounts such as Current Account, Savings Account, Fixed Deposit
Account, etc. The facilities of withdrawal as and when desired, and payment of
interest on deposits encourage people to save money and put it in the banks.
(e) Benefits to Rural Economy: Rural branches of banks play a useful role in
mobilising savings in rural areas and provide loans to farmers and artisans at
concessional rates and on priority basis. This helps the rural economy in a big way.
(f) Balanced Development of Economy: Banks identify areas that need special
assistance for industrial development and provide them the necessary help.
Similarly, they also identify backward regions and help in their economic
development by providing them adequate funds at reasonable rates. Banks thus,
help backward areas in industry and balanced regional development.
(g) Development of Credit Policy: Credit policy is a pre-requisite for economic
development. The central bank of a country develops a proper monetary policy
Business studies (319) Senior Secondary 29
, Module - 1 BUSINESS SUPPORT SERVICES
Introduction to Business by determining the bank rate and regulating the money supply in the larger
interest of the economy of the country and the pace of its development.
2.2.2 TYPES OF BANKS
There are various types of banks that operate in our country to meet the diverse
Note financial needs of customers. One may need money for a short period of time, whereas
others need it for longer period. A businessman may require funds for trading purposes
whereas another may need it for setting up a big manufacturing unit. Sometimes
government also needs money and credit. So to meet all these needs we have different
types of banking institutions, which can be categorised as per their functions:
(a) Commercial bank
(b) Co-operative bank
(c) Development bank
(d) Specialised bank
(e) Central bank
Now let us learn about all these banks.
(a) Commercial Bank: These are the banks that offer services to the general people.
These financial institutions accept deposits from the public and grant short-
term loans and advances to their customers. Now-a-days, the commercial banks
have also started giving medium-term and long-term loans to trade and industry.
Commercial banks may be (i) public sector banks, (ii) private sector banks, or
(iii) foreign banks.
(i) Public Sector Banks: In public sector commercial banks, the majority
stake (more than 50 %) is held by the Government of India or Reserve
Bank of India.
Examples of such banks are: State Bank of India, Bank of Baroda,
Syndicate Bank, Bank of India, etc.
(ii) Private Sectors Banks: In case of private sector banks, the majority of
share capital of the bank is held by private individuals. These banks are
registered as public limited companies.
Examples of such banks are: Jammu and Kashmir Bank Ltd., Lord Krishna Bank
Ltd., ICICI Bank Ltd. Kotak Mahindra Bank, HDFC Bank Ltd. etc.
30 Business studies (319) Senior Secondary
Introduction to Business
2
Note
BUSINESS SUPPORT SERVICES
Have you ever observed the various activities performed by a businessman while
carrying out the business operations? Look at the grocery shop of your locality. What
does the owner do? He arranges funds, buys goods from the main market, carries
those goods to his shop, stores them systematically and sells to the customers as per
their demand. While doing all these activities the owner or the businessman needs
various help or support from others. For example, he may take a loan from the bank,
hire a tempo or truck in carrying the goods and so on. Thus, to carry out any business
activity successfully various support services are required. Let us learn about these
services and their operations. In this lesson we shall learn about the basic aspects like
the meaning, importance and functioning of these support services.
LEARNING OUTCOMES
describes different types of support services;
discusses the importance of these support services for a business; and
applies a right mix of support services for a particular business.
2.1 BUSINESS SUPPORT SERVICES
Business requires support right from the purchase of raw material to delivery of
products.The services that help in this smooth flow are labeled to as business support
services or support services of business. Business support services refer to those
business activities that act as auxiliaries to trade and facilitate smooth flow of goods
from producer to consumer and the functioning of business as such.These include a
wide variety of services like banking, insurance, transportation, warehousing and
Business studies (319) Senior Secondary 27
, Module - 1 BUSINESS SUPPORT SERVICES
Introduction to Business communication. Banking helps in providing finance and payment facilities, insurance to
provide a cover to all sorts of business risks, transportation to facilitate physical
movement of goods from one place to another, warehousing to provide storage facilities
at various places to meet seasonal variations in demand, and communication for
facilitating exchange of information and ideas between producers, middlemen and
Note consumers. Thus, effectively, these business services are essential for the smooth
functioning of any business in any part of the world, and every person who is engaged
in business must be fully aware of their functioning and use. Let us now learn about
each one of these in detail.
2.1.2 TYPES OF SUPPORT SERVICES
The services used by business organisations for the conduct of their activities are the
support services and include:
Banking
Insurance
Transportation
Communication
Warehousing
2.2 BANKING
Bank is an institution that deals in money and credit. It accepts deposits from those
who have funds to spare and grants loans and advances to those who are in need of
funds for various purposes. Thus, banking refers to the various services provided by
banks, such as acceptance of deposits, grant of loans and advances, and other
supplementary services. Banking Regulation Act defines banking as "accepting, for
the purpose of lending or investment of deposits of money from the public repayable
on demand or/and withdrawable by cheque, draft or otherwise". Thus, acceptance of
deposits and lending or investing the same are two essential functions of a bank which
acts as an intermediary and deals with money belonging to the public. In addition, it
provides for a whole lot of other financial services which we will learn in the later part
of the chapter.
28 Business studies (319) Senior Secondary
,BUSINESS SUPPORT SERVICES Module - 1
Indigenous banking system: The exchange and barter system has been Introduction to Business
prevalent in India from earlier times. There were varied types of coins and
weighing practices used at different places. As the economic life progressed,
metals replaced other means because of its uniformity and durability.
Documents such as 'Hundi' and 'Chitti' were in use for carrying out
transactions where money was a medium of exchange. Note
2.2.1 IMPORTANCE OF BANKING
(a) Capital Formation: Deposits accepted by banks are channelised as loans and
advances for industrial and trading activities to business organisations. Thus,
banking indirectly converts savings into investment leading to capital formation
and development of economy.
(b) Services to Business: Banking helps business through a variety of services
such as providing long-term and short-term finance, arranging remittance of
money, collection of cheques and bills etc., assisting in raising of capital by acting
as underwriters and merchant bankers and so on.
(c) Reduces Use of Currency: Banks enable depositors to make payment by
cheque, which is transferable by endorsement and delivery. Besides payments
also can be made through debit cards, credit cards etc. issued by banks instead
of liquid money. Thus, use of currency is considerably reduced.
(d) Mobilisation of Savings: Banks allow savings to be deposited in different
types of accounts such as Current Account, Savings Account, Fixed Deposit
Account, etc. The facilities of withdrawal as and when desired, and payment of
interest on deposits encourage people to save money and put it in the banks.
(e) Benefits to Rural Economy: Rural branches of banks play a useful role in
mobilising savings in rural areas and provide loans to farmers and artisans at
concessional rates and on priority basis. This helps the rural economy in a big way.
(f) Balanced Development of Economy: Banks identify areas that need special
assistance for industrial development and provide them the necessary help.
Similarly, they also identify backward regions and help in their economic
development by providing them adequate funds at reasonable rates. Banks thus,
help backward areas in industry and balanced regional development.
(g) Development of Credit Policy: Credit policy is a pre-requisite for economic
development. The central bank of a country develops a proper monetary policy
Business studies (319) Senior Secondary 29
, Module - 1 BUSINESS SUPPORT SERVICES
Introduction to Business by determining the bank rate and regulating the money supply in the larger
interest of the economy of the country and the pace of its development.
2.2.2 TYPES OF BANKS
There are various types of banks that operate in our country to meet the diverse
Note financial needs of customers. One may need money for a short period of time, whereas
others need it for longer period. A businessman may require funds for trading purposes
whereas another may need it for setting up a big manufacturing unit. Sometimes
government also needs money and credit. So to meet all these needs we have different
types of banking institutions, which can be categorised as per their functions:
(a) Commercial bank
(b) Co-operative bank
(c) Development bank
(d) Specialised bank
(e) Central bank
Now let us learn about all these banks.
(a) Commercial Bank: These are the banks that offer services to the general people.
These financial institutions accept deposits from the public and grant short-
term loans and advances to their customers. Now-a-days, the commercial banks
have also started giving medium-term and long-term loans to trade and industry.
Commercial banks may be (i) public sector banks, (ii) private sector banks, or
(iii) foreign banks.
(i) Public Sector Banks: In public sector commercial banks, the majority
stake (more than 50 %) is held by the Government of India or Reserve
Bank of India.
Examples of such banks are: State Bank of India, Bank of Baroda,
Syndicate Bank, Bank of India, etc.
(ii) Private Sectors Banks: In case of private sector banks, the majority of
share capital of the bank is held by private individuals. These banks are
registered as public limited companies.
Examples of such banks are: Jammu and Kashmir Bank Ltd., Lord Krishna Bank
Ltd., ICICI Bank Ltd. Kotak Mahindra Bank, HDFC Bank Ltd. etc.
30 Business studies (319) Senior Secondary
