Posted in Finance, Accounting and Economics Terms, Total Reads: 641
Definition: Public Fixed Deposit
A Fixed deposit is a deposit or a savings account that provides a fixed rate of return on the investment till the maturity date. Prior withdrawal leads to penalty. A Public Fixed Deposit refers to the loans that are received by the companies from the public. These loans are taken by various small and medium sized companies, and can be for a short or a long term.
The public here can be a general public, an employee or a shareholder, however the loans in terms of debentures and shares do not form a part of the Public Fixed Deposit. Such deposits have a few restrictions and can be made for a term as short as six months to a maximum of 3 years. The interest rates are fixed and lie in a range of 8-9, 9-10, and 10-11 for investments of 1 year, 2 years and 3 years respectively.
The advantage of doing so is that the process is relatively easier, the administrative cost are low, and by borrowing form a large segment of people the company avoids dependency on financial institutions. However the short term period and the risk of losing the money in case of the failure of the company add to a few disadvantages.