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Question
Answer in brief.
What is public deposit?
Solution
- Public deposits are an important source of financing short term requirements of a company. When companies generally receive deposits from the public for the period ranging from 6 months to 36 months, it is known as Public Deposits'.
- Under this method, the general public is invited to deposit their savings with the company for a varied period. Interest is paid by companies on such deposits. The rate of interest is higher than those allowed by commercial banks.
- The company issues 'Deposit Receipt to the depositor. The term deposit is mentioned in the Deposit Receipt'. A deposit Receipt is an acknowledgement of the debt by the company.
Deposits are unsecured loans offered to the company. - It is considered a risky investment but investors can earn a high return on public deposits. Deposits are either secured or unsecured loans offered by the company.
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