Definition of Public Deposits Public deposit is the source of fund for private and non-banking companies.

It means to accept fund from public in the form of deposit. The interest on these deposits is more than interest which is given by banks and post offices. This is the risky investment but investor can earn high return on public deposits. From June 1980, public companies of India also started to accept public deposits. More than Rs. 5000 crore has been invested by Indian Investors in public deposits. Government Regulation on Public Deposits 1. Ceiling on Deposits A company can accepts public deposits up to following level a) Company can accept public deposits up to the 25% of the total of payable capital and free reserves. b) Company can accepts public deposits from existing shareholders or debenture holders up to 10% of total of payable capital and free reserves. 2. Maturity of Deposits Company has to accept deposits from public minimum for 6 months and maximum for 3years. 3. Form and Particulars of Advertisement Company must publish its advertisement in English news paper and in local language newspaper. 4. Form of Application for Deposits Public deposits must be accepted on given application by depositor. 5. Register of Deposits Like register of shareholder and debenture holder, company should record all

persons name, address, deposit cash, date, maturity date, and rate of interest in register of deposits. 6. Interest on Deposits Company can fix rate of interest on deposits money according to regulations of RBI.

The various advantages of public deposits enjoyed by the companies are:

y y y y

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:

y y

The maturity period is short enough Limited fund can be obtained from the public deposits

The advantages of public deposits enjoyed by the investors are:

y y

The interest rate is higher than the other financial investment instruments The fund maturity period is short

The disadvantages of public deposits from the investors' pint of view are:

y y

The interest that is charged on the public deposits does not enjoy tax exemption There is no pledging of security against public deposits