What are Public Deposits? Explain the merits and limitations of Public

1.	What are Public Deposits? Explain the merits and limitations of Public Deposits.
Answer» Merits: The deposits that are raised by organisations directly from the public are known as public deposits. The procedure of obtaining deposits is simple and does not contain restrictive conditions as are generally there in a loan agreement. Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions. Public deposits do not usually create any charge on the assets of the company. The assets can be used as security for raising loans from other sources. As the depositors do not have voting rights, the control of the company is not diluted. Demerits: New companies generally find it difficult to raise funds through public deposits. It is an unreliable source of finance as the public may not respond when the company needs money. Collection of public deposits may prove difficult, particularly when the size of deposits required is large.

What are Public Deposits? Explain the merits and limitations of Public Deposits.

Answer»

Merits:

The deposits that are raised by organisations directly from the public are known as public deposits.
The procedure of obtaining deposits is simple and does not contain restrictive conditions as are generally there in a loan agreement.
Cost of public deposits is generally lower than the cost of borrowings from banks and financial institutions.
Public deposits do not usually create any charge on the assets of the company. The assets can be used as security for raising loans from other sources.
As the depositors do not have voting rights, the control of the company is not diluted.

Demerits:

New companies generally find it difficult to raise funds through public deposits.
It is an unreliable source of finance as the public may not respond when the company needs money.
Collection of public deposits may prove difficult, particularly when the size of deposits required is large.