Explain the pros and cons of public deposits as a source of business f

1.	Explain the pros and cons of public deposits as a source of business finance.
Answer» PUBLIC DEPOSITS:\xa0The deposits that are raised by company direct from the public are known as public deposits. The rate of interest offered on public deposits are higher than the rate of interest on bank deposits. This is regulated by the R.B.I. and cannot exceed 25% of share capital and reserves.MERITS:1. No charge on assets:\xa0The company does not have to mortgage its assets.2. Tax Saving:\xa0Interest paid on public deposits is tax deductable, hence there is tax saving.3. Simple procedure:\xa0The procedure for obtaining public deposits is simpler than share and Debenture.4. Control:\xa0They do not have voting right therefore the control of the company is not diluted.LIMITATIONS:1. For Short Term Finance:\xa0The maturity period is short. The company cannot depend on them for long term.2. Limited fund:\xa0The quantum of public deposit is limited because of legal restrictions 25% of share capital and free reserves.3. Not Suitable for New Company:\xa0New company generally find difficulty to raise funds through public deposits.

Explain the pros and cons of public deposits as a source of business finance.