Inter Company Deposits

& Public Deposits

Name Roll No
Prajwal Sonawane 46
Kritesh Borana 87
Kush Shah 88
Shrawnee Raut 112
Sonia Siddavatam 118

Financial Management - Group 6

Inter Corporate Deposits

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 Characteristics of
Inter-Corporate Deposits

Popular short-term
financing option Interest rate depends
on the amount of
o a brief length of time, Not governed by
such as three or six money invested and
the length of time the any legislation
months.
o procurement procedure loan
is straightforward

Financial Management - Group 6 3

 Types of
Inter-Corporate Deposits
There are three sorts of such deposits:
Call Deposit
o A call deposit is one in which the lender withdraws
the money after giving a one-day notice. In practice,
however, a lender must wait at least three days.
Three-month Deposit
o As the name implies, a three-month deposit offers
funds for three months to cover short-term liquidity
shortages.
Six-month Deposit
o It is a deposit in which the lending company lends
money to another company for six months.
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 POV – Lending Company

ADVANTAGES DISADVANTAGES

• Higher Returns for Surplus Cash • Risk of Default

• Improved Liquidity • Dependence on Relationship

• Strengthen Relationships • Tax Implications

Financial Management - Group 6 5

 POV – Borrowing Company

ADVANTAGES DISADVANTAGES
• Lower Interest Rates • Limited Borrowing Power

• Faster Approval • Creditworthiness Scrutiny

• Reduced Reliance on Banks and • Potential for Reliance

Flexibility
Financial Management - Group 6 6
 o Public deposits refer to money that companies borrow directly
from the general public.

o These deposits are unsecured, meaning they are not backed by

Public Deposits any specific company assets.

o Companies typically offer public deposits to meet their short-term

funding needs.

o Publicly traded companies can issue public deposits, but there are
regulations around this practice.

o Public deposits are generally open to the general public, though

some companies may restrict them to certain classes of
investors.

o Companies typically offer competitive interest rates on public

deposits to attract investors. These rates may be higher than what
banks offer on savings accounts.

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 For Companies:
1. Cost-effective: Public deposits can be a
cheaper source of funding compared to bank
loans.
2. No dilution of ownership: Unlike issuing new
shares, public deposits don't dilute the

Advantages
ownership of the company.

For Investors:
1. Potentially higher returns: Public deposits
often offer higher interest rates than traditional
savings accounts or fixed deposits from banks.
2. Flexibility: Some public deposits may offer
some flexibility, like periodic interest payments
or early redemption options (with penalties).
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 For Companies:
1. Regulations: The process of issuing public deposits
can be complex and subject to strict regulations by
the RBI in India.
2. Limited Eligibility: Only specific types of companies,
typically NBFCs in India, can issue public deposits
according to RBI guidelines.

Disadvantages For Investors:

1. Higher risk: Public deposits are unsecured
investments. If the company issuing the deposit goes
bankrupt, you may lose your entire investment.
2. Lower liquidity: Public deposits typically have a fixed
maturity period. Your money is locked in for that
period, and early redemption may come with
penalties.
3. Risk of default: Public deposits are unsecured debt.
If the company defaults, there's no guarantee
investors will get their money back. 9
 Public Deposits: Need to Know
For Companies​
o Plan your raise
o Get rated (optional)
o Create an offering document
o Get approval
o Market & attract investors
o Manage applications
o Issue & pay interest
o Repay principal
For Investors​
o Read the fine print
o Apply if interested
o Pay upon allocation
o Receive interest & principal
Additional Notes​​
o Early withdrawal may come with penalties.​​
o Consider tax implications before investing.​​
o Brokerage fees might apply depending
on purchase method.​​
o Talk to a financial advisor to assess your suitability.
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 Public Deposits: Technical Deep Dive
Credit Ratings & Interest Rates:
o Credit rating impacts interest rate: Higher rating
= Lower interest offered.
o Interest considers market rates, credit risk, and
deposit term.
Types of Public Deposits:
o Fixed Deposits (most common): Fixed rate for a
set period.
o Non-cumulative: Interest paid at maturity, not
regularly.
o Cumulative: Interest paid regularly
(quarterly/annually).
o Redeemable Deposits (uncommon): Early
withdrawal with penalty.
Accounting:
o Companies: Public deposits are debt (liability),
interest is expense.
o Investors: Public deposits are investments
(assets), interest is income.
Taxes:
o Companies can deduct interest expense from
taxes.
o Investors may owe income tax on interest
earned (depends on location).
Intermediaries:
o Brokers/Advisors: Help companies place
deposits and advise investors.
o Depositories (optional): Securely hold public
deposit certificates.
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Thank You