Question

Briefly explain any two merits of Public Deposits.

Answer 1

Merits of public deposits are:

1. Simplicity: Public deposits are a very convenient source of business finance. The company raising deposits has to simply give an advertisement and issue a receipt to each depositor.
2. Economical: Interest paid on public deposits is lower than that paid on debentures and bank loans. Moreover, no underwriting commission, broking, etc., has to be paid. Interest paid on public deposits is tax-deductible, which reduces tax liability. Therefore, public deposits are a cheaper source of finance.