HSC Organisation of Commerce & Management Sample Paper 3


Organisation of Commerce & Management Sample Paper 2

Sample Paper 3


From the given sub questions attempt any four:

(A) Select the appropriate option from options given below and rewrite them.

(i) Principle of _is based on ‘A place for everything and everything in its place.’

(a) discipline

(b) order

(c) equity

(ii) minimum conflicts are raised.

(a) Controlling

(b) Organising

(c) Co-ordinating

(iii) In the -…-. concept of market, the emphasis is given on ‘buying and selling of goods and services’.

(a) place

(b) exchange

(c) customer

(iv) The President of District Commission is a -.-.-.-.

(a) District Judge

(b) High Court Judge

(c) Supreme Court Judge

(v) -.-.- focuses on motivating the subordinates for group efforts.

(a) Co-ordinating

(b) Direction

(c) Controlling

(B) Give one word or phrase for the following sentences:

(i) The study consists of an organised, systematic and critical assessment of various activities.

(ii) An undertaking or adventure involving uncertainty and risk and require innovation,

(iii) The stage where the goods bought are delivered to the customer.

(iv) A transport system used to carry petroleum and gases.

(v) First function of management.

(C) True or false

(i) Scalar chain means the hierarchy of unity from the top level to the lower level for the purpose of communication.

(ii) The task of getting things done by others is known as management.

(iii) The process of contracting a business function to specialised agencies is known as outsourcing.

(iv) Legal responsibility is broader than the social responsibility of business. (v) The market is derived from the Latin word “Mercatus”.

(D) Match the pairs

Group “A”


Group “B”




Consumer to Consumer





Exist everywhere





First step



Digital cash


Business to Consumer





Electronic business









Efficient business



Exist only in cyberspace



Last step

  1. Explain the following terms / concepts in detail: (Any 4 out of 6 )

(i) Motion Study

(ii) Janahit Yachika

(iii) Insurance

(iv) Directing

(v) Monopoly and Duopoly

(vi) National Commission

  1. Study the following case / situation and express your opinion. (Any 2)

(i) Mr. Harshad is an entrepreneur and engaged in production of eco-friendly utensils. Both male and female workers are working in his factory. All male employees are directly working on machines whereas female employees are working in packaging department. Mr. Sharath is working as finance manager while Mrs. Naina is working as HR manager who is responsible for recruiting employees in the factory. On this basis:

(a) Identify any one principle of management in above case.

(b) What is the designation of Mrs. Naina in this organisation?

(c) Who is responsible for overall planning of the organisation?

(ii) Ms. Nikisha has started new business three years ago. Her customers are located in different parts of the country and hence they are directly depositing bill amount in her business account. At the same time she used to pay various payments from this account only.

(a) Identify type of account maintained by Ms. Nikisha.
(b) Suggest any one modern way of money transfer to Ms. Nikisha.

(c) What kind of facility does she get on her bank account?

(iii) Ram purchases watch from Titan shop and his friend sham purchases watch from online shopping site.

(a) Which shopping is from traditional business?

(b) Which shopping is from e-business?

(c) Which business involved high risk?

  1. Distinguish between (Any 3)

(i) State Commission and National Commission.

(ii) Directing and controlling.

(iii) Fire Insurance and Marine Insurance.

(iv) Marketing and Selling.

26. Answer the following questions in brief (Any 2)

(i) Importance of marketing to the firm.

(ii) Explain in details any four rights of the consumer.

(iii) Define any four types of e-banking services.
6. Justify the following statements (Any 2)

(i) With creativity, farmers can expand their agrotourism business.

(ii) Principle of Equity and Principle of Order are very important.

(iii) Organisations have to fulfil their responsibilities towards government.

(iv) State the benefits and limitations of e-business.

  1. Answer the following questions in detail: (Any 2)

(i) Define and state the scope of CSR and illustrate any five activities covered as per Section 135 of Companies Act, 2013.

(ii) Explain controlling function along with its process and importance.

(iii) Define the secondary functions of bank.

  1. Answer the following questions in detail: (Any 1)

(i) Define and explain Henry Fayol’s administrative theory of management in details.

(ii) Define bank and state the different types of banks.

27. A]) Answer Key

  1. (A) (i) (c) equity

(ii) (a) Controlling

(iii) (b) exchange

(iv) (a) District Judge

(v) (b) Direction

(B) (i) Work Study.

(ii) Enterprise.

(iii) Delivery stage.

(iv) Pipeline transport

(v) Planning

(C) (i) False

(ii) True

(iii) True

(iv) False

(v) True


Group “A”


1. E-Business

e. Electronic business

2. B2C

d. Business to Consumer

3. Outsourcing

f. BPO

4. Digital cash

i. Exist only in cyber-space

5. Registration

c. First step

  1. (i) The study of required motion means movement of an employee as well as of machine while completing a particular task is very important. It is helpful in eliminating unnecessary motions and finding the best method of doing a particular job. It also helps in improving the efficiency of the employees. Motion technique is used to know whether some elements of a job can be eliminated or their sequence can be changed for smooth flow of task.

(ii) Janahit Yachika (Public Interest Litigation) means a legal action initiated in a court of law regarding a matter of general public interest. It is a legal facility under which any person can approach to the court of law in the interest of the society. Its aim is to provide legal remedy to unrepresented groups of society. The party which is not related to grievance can also file Public Interest Litigation. It is filed in the High Court as well as Supreme Court directly in some cases..

(iii) Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss. Insurance is a contract between the insurer and the insured, whereby the insurer agrees to compensate the insured against loss. The insured has to pay a certain fixed sum of money on timely basis to the insurer.

(iv) Directing is the soul of management function. It is the process of instructing, guiding, communicating. inspiring, motivating and supervising the employees to achieve predetermined goals of an organisation. Direction is a continuous function initiated at top level and flows to the lower level through organisational hierarchy. It is a continuous managerial process that goes on throughout the tenure of the organisation. Director is the person who shows the correct path as well as guides the employees in solving the problems wherever necessary. A few philosophers called direction as “life spark of an enterprise”.

(v) In monopoly, there is a single producer or seller who
controls the market. There are no close substitutes for the product. Monopoly controls the supply and can fix the price.

In duopoly, there are two sellers, selling either a homogeneous product or a differentiated product. These two sellers enjoy a monopoly in the sale of the product produced by them.

(vi) A consumer dispute redressal forum at the National level established by the Central Government by notification is known as National Commission. It is also called as the National Consumer Disputes Redressal Commission.

28. 3. (i) Following are the details:

(a) In the above case, principle of division of work is identified.

(b) The designation of Mrs. Naina is Human Resource Manager.

(c) Mr. Harshad an entrepreneur of eco-friendly utensils, is responsible for overall planning of the organisation.

  1. Distinguish Between

(i) State Commission and National Commission (ii) (a) The type of account maintained by Ms. Nikisha is current account.

(b) NEFT stands for National Electronic Funds transfer. Under this system, funds are transferred electronically from one branch to another branch or one bank to another bank in the country. The client has to give details of such as NEFT code of branch and account number of beneficiary to whom the money is to be transferred.

(c) An overdraft facility is available on their current account. For the current account, banks provide a statement of account every month.

(iii) Following are the details:

(a) The purchase of watch by Ram from Titan shop is an example of traditional business.

(b) The purchase of watch by Sham from an online shopping site is an example of e-business.

(c) E-business sites involve high risk as there is no direct contact between Sham and he e-business owners.

Point of Distinction

State Commission

National Commission


A consumer dispute redressal forum

at the state level established by the

State Government is known as State


A consumer dispute redressal forum at the

national level established by the Central

Government by notification is known as

National Commission.


A person who is sitting or retired or Judge

of High Court, shall, be appointed by the

State Government as the President of

State Commission.

A person who is or has been a Judge of

the Central Government by notification is

known as National Commission.


Not less than four or not more than

such number of members as may be

prescribed in consultation with the

Central Government.

Not less than four and not more than such

number members as may beprescribed.

Membership Tenure

The members can have the membership

for a term of five years or up to the age

sixty seven, whichever is earlier.

The members can have the membership

for a term of five years or up to the age

sixty seven years and President upto

seventy years, whichever is earlier.

(ii) Directing and Controlling

Point of Distinction




Directing is the guidance inspiration, the

leadership of those men and women

constitute the real case responsibilities of


Controlling is the process of taking steps

to bring actual results and desired results

closer together.


To direct the subordinates to get the

things done in the right manner.

To ensure that the objectives are achieved

according to the plan.

Area of function

It includes instructing, guiding, inspiring.

communicating and motivating the

human resources.

It includes setting up of standards,

measurement, and comparison with

actual performance and taking corrective

steps whenever necessary.


Directing is concerned directly with

internal factors i.e., human resources.

Internal and external factors are taken

into account for taking corrective action.


It follows organising and staffing for

execution of planning.

It is an end function of management



It gives direction to the employees

regarding use of other resources.

It is related to all organisational resources

which help to achieve goals of an


(iii) Fire Insurance and Marine Insurance


Fire Insurance

Marine Insurance


Meaning: A contract in which insurer promises to

pay compensation to insured if something happens

to the subject matter due to fire or related events.

A contract where by the insurance company undertakes

to pay compensations to in insured in case of loss to him

due to dangers (perils) of the sea..


Policy taken by: It can be taken by individual for

their properties or by business. For their goods

properties business liabilities.

It can be taken by exporter, importers and shipping

companies etc..


Subject Matter: In fire insurance, the goods and

assets or property of the insured is the subject


In Marine insurance, goods in ship, cargo and freight is

the subject matter.


Insurable Interest: It must exist both at the time of

contract and also at the time of loss.

e of contract and also at the time


Tenure: It is generally for a short period like one


It is generally for a short period and may range from

one month to a year. Normally it does not exceed one



Compensation: It is paid only if there is loss due to

fire during term of policy

It is paid only if there is loss causing event during the

term of the policy.


Principle for Indemnity: It is applicable as

insurance company compensates for the financial

loss and the insured is brought back to the same

financial condition that he was before the event.

It is applicable as insurance company compensates for

the financial loss and the insured is brought back to the

same financial condition that he was before the event.


Number of policies: Generally only one policy can

be taken but double insurance is possible. However.

compensation does not exceed the actual loss.

Generally, only one policy can be taken. However, double

insurance is possible. However, compensation does not

exceed the actual loss.


Beneficiary: The beneficiary is the insured who has

insured the property or goods.

The beneficiary is the insured person or company.


Surrender of Policy: It cannot be surrendered.

It cannot be surrendered.

(iv) Marketing and Selling.



Marketing is a social process by which a need is created.

offered and exchanged via products.

Selling means providing the customer with the good he/

she needs in exchange of a price.

Marketing is a wider concept. It includes Selling and

other functions.

Selling is a narrower concept. It is a part of the marketing


Satisfaction of consumers is the essence of the marketing


The selling concept relies on the transfer of title and

possession of the product from one person to another.

Marketing is consumer oriented. It emphasises on

consumers and the maximisation of their satisfaction.

Selling is production oriented. It emphasizes on

production and its efficiency.

29. 5. (i) Importance of marketing to the firm:

(a) Increases Awareness: Marketing helps in creating awareness about the existing products, new arrivals as well as the company which sells a particular product in the market. This raises awareness among the potential consumers. It creates brand image among the consumers.

(b) Increases Sales: Once marketing creates awareness about the products or services among the consumers, it attracts them to purchase the same. Successful marketing campaign helps to increase the sales of the organisation. Increase in sale generates profit for the organisation. This income and profit are reinvested in the business to earn more profits in future. In modern business, survival of the organisation depends on the effectiveness of the marketing function.

(c) Creates Trust: People want to buy from a business that has a trustworthy reputation. Creating trust among the customers is a time consuming process. Creating trust among the consumers helps the business to earn loyal customers. Once business can establish this trust with the clients, it creates customer loyalty. Happy customers enhance the brand image in the market. Effective marketing plays an important role in building a relationship between the customers and the organisation.

Effective pricing policy and timely after sales services improve the image of the organisation. A majority of the activities of the marketers are directed towards building the brand equity of the business.

(d) Basis for Making Decisions: From inception of idea to delivering the final product to the customer, businessman has to take several decisions. Businessman has to look after many problems such as what, how, when. How much and for whom to produce? As the scale of operation increases, these decisions become more complex. Marketing helps to take right decision at right time.

30. (ii) Rights of Consumer:

(a) Right to Safety: This right protects consumers against products, production processes and services which are hazardous to health or life. It includes concern for consumer’s long-term interests as well as their immediate requirements. According to this right, consumer must get full safety and protection to his life and health. This safety should be in relation to medicines, electrical appliances, food etc. The GOI has given safety standards in the form of Agmark, ISI, BIS, Hallmark etc.

(b) Right to Information: According to this right, consumer should be provided with adequate Information about all aspects of goods and services like price, name of manufacturer. contents used, batch number if any, date of manufacture and expiry date, user manual and safety instruction etc. This right also enables consumer to select right product or service. It is applicable to food products, medicines, spare parts or any other consumer products or services.

(c) Right to Choose: The choices available to Indian consumers across the basket of goods and services have multiplied like telecommunications, travel and tourism, banking, electronics, fast moving consumer goods (FMCG) etc. According to this right, consumer should be given full freedom to select an article as per his requirement, liking and purchasing capacity. The right to choose is related to the concept of free market economy. As per this right, the seller cannot compel consumer to buy any particular product and hence monopoly is prevented.

(d) Right to be Heard: Every business organisation should listen and resolve the complaints of consumers. According to this right, consumers have opportunity to voice their complaint to the consumer forum. Consumers can also give suggestions to manufacturer or trader on certain matters such as quality, quantity, price, packaging etc. Now a days, consumers can file online complaints through portal or mobile applications.

(iii) E-banking Service: E-banking stands for electronic banking it is also called ‘virtual banking.’ E-banking is the result of the development in the field of electronics and computers. Under e-banking, the banking operations are computerised. Some of the elements of e-banking are as follows:

(a) Automated Teller Machine: The ATM’s are electronic machines which are operated by the customer on his own to withdraw or deposit money. It can be used for other banking transactions also such as balance enquiry. transferring money, request for cheque book or bank statements etc. Nowadays, ATM also provides facility of cash deposits through cash deposit machines.

(b) Credit Cards: A credit card is a payment card. It allows the cardholder to pay for different transactions he performs. The issuing bank creates a revolving account and grants a line of credit to the customer or user. Credit card offers convenience to customers as customer need not carry cash.

(c) Debit cards: most of the banks nowadays offer debit card as soon as account is opened by account holder. Through debit card payments, the amount gets deducted from account holder’s account. Some banks offer personalised debit and credit cards as per the requirement of customer.

(d) RTGS: RTGS stands for real time gross settlement. RTGS is a fund transfer system where transfer of funds or money takes place from one bank to another bank on “real time” and on “gross basis”. It
is the fastest money transfer system through the banking channel.

  • Real time settlement means payment transaction is not subject to any waiting period. The transactions are settled as soon as they are processed. The receiving bank has to credit the account of the client within 2 hours of receiving the funds transfer message.
  • Gross settlement means the transactions are settled on one to one basis without bunching with any other transactions. The minimum amount to be remitted through RTGS is two lacs while there is no upper limit for transactions.

31. 6. (i) Activities in Agro Tourism Business includes:

(a) Outdoor recreation (Trekking, fishing, hunting. wildlife study, horseback riding).

(b) Educational experiences (Farming experiences like rice plantation, cooking experience on chulha).

(c) Entertainment (Harvest festivals like ‘Hurda Party’ in Maharashtra).

(d) Hospitality services (Farm stays, guided tours or outfitter services).

(e) On-farm direct sales (U-pick operations or roadside stands).

Happy customers will act as a ambassador of agrotourism. They’ll also tell their friends and family about farm. Farmers can add value to the guests’ experiences by offering them refreshments. They can select products that compliment what they produce on farm, such as milk or butter samples, fresh food, Fresh fruit juice etc.

(ii) Principle of Equity and Order:

Principle of Equity: Management should be fair as well as friendly to the subordinates. While dividing the work, delegating the authorities, deciding the monetary terms etc. there should not be any discrimination between the employees. It is also suggested that the remuneration should not depend on the department but at the level on which subordinates are working. The employees working on the same level but in different departments should be paid same wages. This equity will help in avoiding conflicts in the organisation.

Principle of Order: This principle is based on ‘A place for everything and everything in its place’. Human resources and materials should be in the right place at the right time for maximum efficiency. Human resources should be placed at right place and on right job. The principle focuses on the proper utilisation of physical and human resources.)

(iii) Responsibilities Towards Government:

The government regulates and controls the business with the objectives of systematic economic development of the country and safeguarding the interests of the common man. Government provides incentives and subsidies to business. Following are the responsibilities of organisation towards government: (a) Timely Payment of Taxes: The government imposes various types of taxes like sales tax, income tax, wealth tax etc. Business units should pay these taxes from time to time. It would be difficult for the government to undertake development projects without availability of funds.

(b) Observing Rules and Regulations: The rules framed by the government for business should be fully complied with. The business should follow the laws regarding obtaining license for a specified business, the operation of the business, price determination and production etc. They should conduct business in lawful manner.

(c) Earning Foreign Exchange: The government also expects from business organisation that it will earn foreign exchange by exporting goods. The government requires this foreign exchange for importing various goods.

(d) Economic Development: The government sets the targets for balanced and rapid economic development of the country. The business organisation should provide necessary cooperation to the government.

(iv) Benefits of E-Business: The main advantage of e-business is people get product information online and order the product online through cash on delivery or pre payment. In this way seller and buyer both get advantage of internet platform.

Traditionally trading by the buyers and sellers is done through three channels like face to face, mail and phone. The internet has become the fourth channel for trade. Internet trade is booming and allowing business to sell more and at a lower cost. Thus, Internet offers a great opportunity over traditional channels as it has some advantage or strengths.

(a) Ease of formation: The formation of traditional business is difficult, whereas to form -business is relatively easy to start.

(b) Lower Investment requirements: Investment requirements is low as compared to traditional business as the store does not have physical existence and can be managed with less manpower so if trade does not have much of the investment but have contact (network), he can do fabulous business.

(c) Convenience: Internet offers the convenience of days a year. Business is going on any time and flexibility is available. Yes, -business is truly a business that has enabled and enhanced by electronics and offers the advantage of accessing anything, any where, any time.

(d) Speed: The benefit becomes all the more attractive when it comes to information. Much of the buying or selling involves exchange of information that Internet allows at the click of mouse.

(e) Global access: Internet is truly without
boundaries. On one hand, it allows, the seller an access to the global market. On the other hand, it offers a freedom to the buyer to choose products from almost any part of the world. No need of face to face interaction between buyer and seller.

(f) Movement towards a paperless society: Use of Internet has considerably reduced the dependence on paperwork. Thus, recording and referencing of information has become easy.

(g) Government support: The government provides favourable environment for setting up of e-business. This support ensures maximum transparency.

(h) Easy payment: The payment is e-business is done by credit card, fund transfer etc. and it is available round the clock.

(v) Limitations of E-Business: E-business does have certain disadvantages when compared to the traditional way of doing business. Some of the limitations of e-business are as follows.

(a) Lack of personal Touch: E-business lacks the personal touch. One cannot touch or feel the products. So it is difficult for the consumers to check the quality of products.

(b) Delivery Time: The delivery of the products takes time. In traditional business you get the product as soon as you buy it. But that doesn’t happen in online business. This time lag often discourages customers e.g., Amazon now assures one day delivery. This is an improvement but does not resolve the issue completely.

(c) Security issues: There are a lot of people who scam through online business. Also, it is easier for hackers to get your financial details. It has a few security and integrity issues. This also cause disturbance among potential customers.

(d) Government interference: Sometimes the government monitoring can lead to interfere the business.

(e) High Risk: High risk is involved there is no-direct contact between the parties. In case of frauds, it becomes difficult to take legal action.

  1. (i) CSR Meaning: Corporate Social Responsibility (CSR) is self-regulating business model, aims to contribute to societal goals or support volunteering or ethicallyoriented practices. It makes a company socially responsible and accountable. This accountability is towards itself, its stakeholders, public in general etc. By practicing social responsibility, companies can be conscious about economic, social and environmental aspects of the society.

32. Scope of CSR:

(a) Applicability of CSR:

  1. The companies having net worth of . or more or turnover of . or more; or Net profit of ₹ . or more during any financial year shall be required to constitute a Corporate Social Responsibility Committee of the Board with effect from 1st April, 2014.
  2. The Board’s report shall disclose the compositions of the CSR Committee.
  3. All companies shall spend, in every financial year, at least of the average net profits of the company made during the three immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

(b) CSR Activities: The Policy recognises that corporate social responsibility is a commitment to support initiatives that measurably improve the lives of underprivileged by one or more of the following focus areas as notified under Section 135 of the Companies Act 2013 and Companies (Corporate Social Responsibility Policy) Rules 2014:

  1. Eradicating hunger, poverty & malnutrition, promoting preventive health care & sanitation and making available safe drinking water.
  2. Promoting education, including special education & employment enhancing vocational skills especially among children, women, elderly & the differently abled & livelihood enhancement projects.
  3. Reducing child mortality and improving maternal health by providing good hospital facilities and low cost medicines.
  4. Ensuring environmental sustainability, ecological balance, protection of flora & fauna, animal welfare, agro forestry, conservation of natural resources & maintaining quality of soil, air & water.
  5. Employment enhancing vocational skills.

33. (ii) Controlling:

Meaning: Controlling is a function of comparing the actual performance with the predetermined standard performance. It measures deviation, if any. identifies the causes of deviation and suggests corrective measures. The process of controlling helps in formulation of future plans also.

34. Process of Controlling

35. Importance of Controlling:

Controlling is important in maintaining standards and to achieve desired goals effectively and efficiently. It is a function of checking the performances of
employees at every stage of their work in process. The importance of controlling function in an organisation is as follows:

(a) Fulfilling Goals of Organisation: Controlling is the function of measuring the performances at every possible stage, finding out the deviations, if any; and taking corrective actions according to planned activities for the organisation. Thus, it helps in fulfilling the organisational goals.

(b) Making Efficient Utilisation of Resources: Various techniques are used by managers to reduce wastage of material and spoilage of other resources. Standards are set for every performance. Employees have to follow these standards. As the effect of this, the resources are used by employees in the most efficient and effective manner, so as to achieve organisational objectives..

(c) Accuracy of Standards: An efficient control system helps management in judging the accuracy of standards whether they are accurate or not. Controlling measures are flexible to some extent. So after reviewing them according to changing circumstances, they are revised from time to time which is beneficial for checking performances accurately.

(d) Motivates Employee: After setting standards of checking performance, they are communicated to employees in advance. Due to this, employees get an idea about what to do and how to do. Performances are evaluated and on that basis employees are rewarded in the form of increment. bonus, promotion etc. It motivates the employees to perform at their best level.

(iii) Secondary Functions of Bank:

Secondary functions of commercial banks are classified into two groups:

(A) Agency Functions: A commercial bank acts as an agent or representative of its client and performs certain functions as follows:

  1. Periodic Collections and Payments: Commercial bank collects salary, dividends, interests and any other income periodically as well as makes periodical payments such as taxes, bills, premiums, rent etc. on the standing instructions provided by customer. Commercial bank charges certain fixed amount quarterly or annually in the form of service charges from customer for providing such services.
  2. Portfolio Management: Large commercial banks undertake to purchase and to sell securities such as shares, bonds, debentures etc. on behalf of the clients. This handling of securities is known as portfolio management. Due to this facility more clients are opting for such services of commercial banks.
  3. Fund Transfer: Commercial banks provide facility of fund transfer from one branch to another branch or branch of another bank. Commercial banks come with various initiatives to make these transfer hassle free.
  4. Dematerialisation: Banks provides dematerialisation facilities to their clients to hold their securities in an electronic format. On behalf of clients, it undertakes the electronic transfer of shares in case of purchase or sale.
  5. Forex Transactions: Forex is an abbreviation for foreign exchange. A bank may purchase or sell foreign exchange on behalf of its clients. A bank purchases forex from its clients which the clients receive from foreign transactions and sell the forex when the clients need it for overseas transactions.

(B) Utility Functions: A commercial bank performs utility functions for the benefits of its clients. It provides certain facilities or products to its clients as follow:

  1. Issue of Drafts and Cheques: draft/cheque is an order to pay money from one branch of bank to another branch of the same bank or other bank. A bank issues drafts to its account holders as well as non account holders whereas cheques are issued only to the account holders. Bank charges commission for issuing a bank draft.
  2. Locker Facility: This is common utility function of any commercial bank. The bank provides locker facility for the safe custody of valuables, documents, gold ornaments etc.
  3. Project Reports: A bank may prepare project reports and feasibility studies on behalf of the clients. Project reports enable the business firm to obtain funds from the market and to obtain clearance from government authorities.
  4. Gift Cheques: Banks issue gift cheques and gold coins to account holders as well as to non account holders.

The gift cheques/ coins can be used by the clients for the purpose of gifting on occasions like weddings, birthdays etc.

  1. Underwriting Services: A commercial bank may underwrite the issue of securities issued by companies. If the shares are not fully subscribed, the underwriting bank agrees to take up the unsubscribed portion of the securities.
  2. (i) Henry Fayol (1841-1925) was a french mining engineer who turned into a leading industrialist and a successful manager. He started his career as a mining engineer in a french mining company and rose to the position of the chief managing director. After conducting many experiments and observations in organisation, Fayol proposed 14 Principles of management which are explained in his famous book ‘General And Industrial Administration’. Due to his contribution in development of managerial thoughts he is called as ‘Father of Modern Management’. Fayol
    suggested 14 principles of management. These ctataments serve as a guideline for decision-making nanagement actions.

inciples are Summarised as follows:

  1. Principle of Division of Work
  2. Principle of Authority and Responsibility
  3. Principle of Discipline
  4. Principle of Unity of Command
  5. Principle of Unity of Direction
  6. Principle of Subordination of Individual Interest to Organisational Interest
  7. Principle of Centralisation
  8. Principle of Remuneration
  9. Principle of Scalar Chain
  10. Principle of Order
  11. Principle of Equity
  12. Principle of Stability of Tenure
  13. Principle of Initiative
  14. Principle of Esprit De Corps (team work)

(a) Principle of Division of Work: According to this principle, the work is divided into different kinds such as technical, financial, commercial, security operations, accounting and managerial. It is assigned to employees as per their qualities and capabilities. It helps in improving efficiency and expertise of employees which ultimately turns into expected productivity level.

(b) Principle of Authority and Responsibility: Authority is the right to take decisions. It is necessary to get the things done appropriately from subordinates. Authority always comes with the responsibility. If the manager is given the authority to complete a task within a given time, he should be held responsible if he does not complete the work in given time. Manager should have proper authorities to take managerial decision on his own in respect to the goal.

(c) Principle of Discipline: According to Fayol, discipline is the most essential thing in the organisation. Employees must obey and respect the rules that govern the organisation. Discipline helps to achieve the goals in the organisation. Good discipline is the result of effective leadership. There must be a clear understanding between the management and workers regarding the organisation’s rules. Basic discipline should be observed at all levels of management.

(d) Principle of Unity of Command: Each member of organisation should receive orders from only one superior. This principle helps in managing conflicts and solving disputes among people in organisation. It also helps in avoiding confusion. If an employee receives commands from more than one authority, he will get confused and will not be able to take decision about whose orders should be followed. This is wrong approach. For this organisational hierarchy should be well defined. Each employee should know his immediate superior and should receive orders from him only.

(e) Principle of Unity of Direction: This principle states that ‘there should be one head and one plan’ in every organisation. Each group in the organisation should have the same objective and the group should be directed by one manager using single plan.

(f) Principle of Subordination of Individual Interest to Organisational Interest: According to this principle the interest of an individual must be given less importance than the interest of the organisation. While taking decision in the organisation the manager should always consider the interest of the whole group rather than the interest of a single employee. Similarly the employee should protect the interest of the organisation first and his personal interest should be subordinated. For example, in every game, the players are always thinking about winning the match as a team rather than their individual records.

(g) Principle of Centralisation: Centralisation refers to the concentration of powers and authorities. In some organisations this power is vested in one hand or few hands. This situation occurs in the small organisations. But, if the size of organisation is large then there is a decentralisation of the power or authority.

According to this principle there must be a proper balance between centralisation and decentralisation in the organisation. This is to be done according to the size of the organisation, nature of the activity etc.

(h) Principle of Remuneration: Appropriate remuneration to staff or employees is the principle to keep them satisfied financially as well as retain them for long span of time within the organisation. The fair remuneration has effect on the productivity and efficiency level of employee. The remuneration should be fixed by taking into consideration the skill, expertise, knowledge, tenure, cost of living, market trend, profitability of organisation etc.

(i) Principle of Scalar Chain: Scalar chain means the hierarchy of authority from the top level to the lower level for the purpose of communication. This helps to ensure the orderly flow of information and communication. Traditionally organisations used to frame large scalar chain which is time consuming. For example, a general Manager informs the decision to respective functional manager, then functional manager will pass it to supervisor, the supervisor will
inform it to foreman and so on according to level of authority. For avoiding this longer chain and to take speedy decisions cross communication or direct communication is followed by various organisations which is known as gang plank. For direct communication, proper permission of the authorities is necessary.

(j) Principle of Order: This principle is based on ‘a place for everything and everything in its place’. Human resources and materials should be in the right place at the right time for maximum efficiency. Human resources should be placed at right place and on right job. The principle focuses on the proper utilisation of physical and human resources.

(k) Principle of Equity: Management should be fair as well as friendly to the subordinates. While dividing the work, delegating the authorities, deciding the monetary terms etc. There should not be any discrimination between the employees. It is also suggested that the remuneration should not depend on the department but at the level on which subordinates are working. The employees working on the same level but in different departments should be paid same wages. This equity will help in avoiding conflicts in the organisation.

(l) Principle of Stability of Tenure: At the time of recruitment of employees, the management should assure them about stability of tenure or job security. It plays very important role in creating sense of belongingness among the employees. Insecurity in job always affect the efficiency of employees adversely whereas job security minimizes employee turnover ratio. (m) Principle of Initiative: Initiative refers to volunteering to do the work in an innovative way. The freedom to think and work on new ideas encourages employees to take initiative while working on given task. This initiative should be welcomed by the manager including thorough discussion on those new ideas. It also helps in creating healthy organisational culture.

(n) Principle of Esprit De Corps : (team work) Henry Fayol has given emphasis on team work. Esprit de corps means union is strength. Running any organisation is a group activity and human resources are the valuable asset of the organisation. If all employees are working as a union and with mutual trust, the difficulties can be solved quickly. Therefore, as a leader, manager should create a spirit of team work and understanding among employees to achieve organisational goal easily.

Above fourteen principles of Henry Fayol are very useful to manage the organisation efficiently and effectively. These are also supportive to functions of management. These principles are very logical and therefore are applicable in modern management era.

36. (ii) Meaning of Bank

A bank is a financial institution which deals with deposits and advances and other related services. Bank provides various services related to money or financial requirements of consumers.

(i) Types of Banks: There are several types of banks as follows:

  1. Central Bank: The Central Bank is the apex financial institution in banking industry in the country. Every country has their own Central Bank. In India, the Reserve Bank of India (RBI) is the Central Bank. RBI was established in 1945 under the Reserve Bank of India Act, 1944. Some functions of RBI are as follows:

(a) Frames monetary policy

(b) Issues currency notes (c) Acts as a banker to the Government

(d) Acts as a banker’s bank to commercial and other banks in India.

  1. Commercial Bank: The commercial banks play an important role in economic and social development of a country. Commercial banks performs important functions such as: Primary Functions i.e. accepting of deposits and lending of money and secondary functions i.e. agency functions and utility functions. In India, commercial banks are
    divided into three groups:

(a) Public sector banks where majority of capital is held by government such as Bank of India, State Bank of India etc.

(b) Private sector banks are owned by group of individuals such as AXIS bank. HDFC bank etc.

(c) Foreign banks are those banks which are established outside India but these banks have branches in India such as Citi bank, HSBC, Standard Chartered etc.

  1. Co-operative Bank: In India, co-operative banks are registered under Indian Cooperatives Societies Act and regulated under Banking regulation Act. Co-operative banks are popular in semi-urban and rural areas. The main aim of co-operative bank is to provide credit to economically backward people, farmers and small scale units. Generally, the co-operative bank works at three different levels:

(a) Primary Credit Societies.

(b) District Central Co-operative Bank.

(c) State Co-operative Bank.

  1. Industrial Development Banks: These are financial institutions that provide medium and long term funds to the business firms. Examples of development bank are Industrial Finance Corporation of India (IFCI). State Finance Corporation (SFC). Maharashtra State Finance Corporation(MSFC) etc. Some functions of development bank are as follows:

(a) Provision of medium and long-term funds to business units for the purpose of expansion and modernisation.

(b) Underwriting of shares issued by public limited companies.

(c) Purchase of debentures and bonds.

  1. Exchange Banks: The exchange banks as well as large commercial banks facilitates foreign exchange transactions. Examples of exchange banks are Barclays Bank, Bank of Tokyo etc. Some functions of exchange bank are as follows:

(a) Financing foreign trade transactions.

(b) Issue of letter of credit (LC).

(c) Discounting of bills of exchange.

(d) Remittances of dividend, interests and profits etc.

  1. Regional Rural Bank: Regional Rural Banks (RRBs) were established in 1975. These banks are sponsored by large public sector banks. The capital of RRB is contributed by Central Government 50%, State Government 15% and Sponsored Banks 35%. RRBs mobilise deposits primarily from rural and semiurban areas and provide loans and advances mostly to small and marginal farmers, agricultural labour and rural artisans.
  2. Savings Bank: The main objective of savings bank is to encourage savings of the people, especially in rural areas.

Examples of such banks include postal saving bank, commercial banks and cooperatives banks.

  1. Investment Bank: These banks provide financial and advisory assistance to their customers. Their clients generally include business firms and government organisations. Investment banks facilitate mergers and acquisitions by undertaking research and providing advice on investment decisions. Generally, investment banks do not directly deal with general public.
  2. Specialised Banks: These banks cater to the requirements and provide overall support for setting up business in specific areas.
  3. Export and Import Bank (EXIM).
  4. (b) Small Industries Development Bank of India (SIDBI).
  5. (c) National Bank for Agriculture and Rural Development (NABARD).