Meaning: - The term 'Public deposit' means any money collected by a company in the
form of deposits or loans from the public. The advantages are as follows:
Definition: -According to
Companies Act 1956 the term deposit means 'Any deposit of money with the
company and any amount borrowed by the company'
1.
Lower Cost: -The rate of
interest on deposits is lower than the rate of interest on loans from banks.
2.
Unsecured: - Deposits are
unsecured loans and thus no charge is to be created on the assets of the
company.
3.
Control: - Deposits do
not provide the depositors any control over the company and thus the owners
retain the ownership in their existing ratios.
4.
Tax Savings: -Interest paid
on public deposits by the company is deducted as expenses while calculating
taxable income. Thus, the tax liability of the company is reduced.
5.
Working Capital: -Deposits act
as an important source of raising working capital for the company.
6.
Increase in
shareholders Return: - The interest cost of deposits is lower than
loans from banks which increase the profits and thereby return to shareholders.
