Public deposit
- 2. Public Deposits Public deposits are an important source of financing the medium-term and long-term requirements of a company. The term 'public deposit' implies any money received by a company through the deposits or loans collected from the public. The public includes the general public, employees and shareholders of the company but excludes the money received in the form of shares and debentures. The public deposits are generally solicited by the firms in order to finance the working capital requirements of the firm.
- 3. INTEREST RATE The companies offer interest to the investors over public deposits. There is no restriction for interest rate The companies generally offer RATE ☺ 8 to 9 percent interest rate FOR ONE YEAR ☺ 9 to 10 percent interest rate FOR TWO YEARS ☺ 10 to 11 percent interest rate FOR THREE YEARS
- 4. PROCEDURE TO RAISE FUNDS THROUGH PD public deposits advertise in the newspaper The advertisement highlights the achievement and future prospects rate of interest which may vary depending upon the period for which money is deposit It also declares the time and mode of payment of interest and the repayment of deposit A deposit may get his money back before the date of repayment of deposits for which he will have to give notice in advance
- 5. According to the Companies Amendment Rules 1978 The maximum maturity period for a public deposit is 3 years The minimum maturity period for public deposits is 6 months The maximum maturity period for a public deposit for NBFCs is 5 years a company cannot go past 25% of free reserves and share capitals The companies asking for public deposits need to publish information regarding the position and financial performance of the firm The companies having public deposits need to keep aside the 10% of the deposits by 30th April every year that will mature by 31st March next year.
- 6. FEATURES OF PUBLIC DEPOSIT These deposits are not secured They are available for a period ranging between 6 months and 3 years They carry fixed rate of interest They do not require complicated legal formalities as are required in the case of shares or debentures
- 7. ADVANTAGES AND DISADVANTAGES from the company's point of view are: The various advantages : There is no involvement of restrictive agreement The process involved in gaining public deposit is simple and easy The cost incurred after tax is reasonable Since there is no need to pledge security for public deposits, the assets of firm that can be mortgaged can be preserved The disadvantages of public deposits from the company's point of view are: The maturity period is short enough Limited fund can be obtained from the public deposits
- 8. ADVANTAGES AND DISADVANTES from the investors' point of view are: The advantages of public deposits The interest rate is higher than the other financial investment instruments The fund maturity period is short The disadvantages of public deposits The interest that is charged on the public deposits does not enjoy tax exemption There is no pledging of security against public deposits
- 9. THANK YOU