Public finance is also used as a tool to stabilize the economy by the government. in our country) is made for the period ranging from 1 to 3 years. It is primarily because there is a lack of proper planning. (ii) It is unreliable since it is fair weather friend, i.e., wholesale withdrawal of this deposit may take place when the company is in recession. Account Disable 11. (iv) Advantages on trading on equity can be taken by the company since the rate of interest and the period of deposits are fixed. Acquisition of finance through public deposits is very easy. ����˹�fH��$W�]-. Therefore, the real cost of funds which are supplied by public deposits may be calculated with the help of the following formula: We have considered so far only one aspect, i.e., taxation effect. It is an inelastic source of finance, i.e., it cannot be regulated according to the needs of company finance. When did organ music become associated with baseball? endobj This method of raising fund is becoming popular at present since the bank credit is becoming costlier. 4.7 (22) Finance is actually that soul out of business relationship. These rules and provisions were modified’ revised and made more comprehensive from time to time in order to exercise control over these deposits and. Content Guidelines 2. (v) It enjoys tax exemption, i.e., loan finance enables the company to save the company from taxation. Sufficient securities should also be offered. This is detrimental to the development of the capital market. Read on to find out more. After reading this article you will learn about:- 1. 3 0 obj The company need not create any charge over its assets. Importance of Public Finance in Developing Countries, Helps in Removing Inequalities in Terms of Wealth and Income, Helps in Controlling Inflation & Deflation, Helps in Developing Well Structure & Infrastructure, Helps in Encouraging Savings & Investment, Helps in Allocating Resources Properly & Efficiently, Helps in Bringing Balanced Development in the Economy, Long-term and Short-term sources of Finance, 7 Importance of Public Relations in Marketing, 5 Importance of Public Relations in an Organisation, Advantages & Disadvantages of Public Private Partnership. RBI has started to control and regulate the flow of public deposits, i.e., since 1975, no non-banking company may accept deposit more than 15% of its paid-up capital plus free reserves. Interest paid on public deposits is tax deductible expenditure. In order to start up or even run a successful business, you will need excellent knowledge in financial management. What channel number is One America News on Dish Network? endobj in India It is interesting to note that the actual cost of public deposits is more in comparison with the nominal cost This is due to the fact that in case of other long-term or short-term borrowings the entire amount of interest cost is an admissible charge against the revenue while computing taxable profit. But there are other aspects also For instance, a certain amount is to be incurred on account of brokerage/ advertisement, forms, etc. The material on this site can not be reproduced, distributed, transmitted, cached or otherwise used, except with prior written permission of Multiply. (adsbygoogle = window.adsbygoogle || []).push({}); Concepts of Public Deposits | Advantages | Disadvantages, Dematerialization | Meaning | Process | Procedure of Purchase & Sale, Bank Finance | Classification, Forms, Methods, Merits, Demerits, Firm Allotment | Preferential Allotment | SEBI Regulation, Traditional Functions of Reserve Bank of India, Planning | Meaning | Kinds | Essentials of Sound Plan, Major Players in the financial services industry, Weaknesses of Trade Union Movement in India and Suggestion to Strengthen, Audit Planning & Developing an Active Audit Plan – Considerations, Advantages, Good and evil effects of Inflation on Economy, Vouching of Cash Receipts | General Guidelines to Auditors, Audit of Clubs, Hotels & Cinemas in India | Guidelines to Auditors, Depreciation – Meaning, Characteristics, Causes, Objectives, Factors Affecting Depreciation Calculation, Inequality of Income – Causes, Evils or Consequences, Accountlearning | Contents for Management Studies |. Cost of administering public deposits is lower when compared to the issue of debentures. <> It will ensure the liquidity of public deposits and guaranteed repayment of maturing deposits which cannot be renewed The amount so deposited or invested shall be utilised only for the repayment of deposit maturing during the respective year. <>>> 2. iii. with the growth and development of banking facilities, it is gradually losing its importance. Financial management is one of the most important aspects in business. Simson, R. Sharma, N. Aziz, I., Overseas Development Institute, 2011. (v) It enjoys tax exemption, i.e., loan finance enables the company to save the company from taxation. Depending on the level of government and the specific nation, these can range from water and sewage service in a city to a national health plan. Home » Financial System » Importance of Public Finance. <> Advantages of Public Deposits 3. Public financial management is the administration of funds used to deliver public services. This is due to following advantages: 1. Is there a way to search all eBay sites for different countries at once? stream The interest of the depositors is not fully protected. Uploader Agreement, Read Accounting Notes, Procedures, Problems and Solutions, Learn Accounting: Notes, Procedures, Problems and Solutions, Top 10 Sources of Working Capital Finance | Business, Top 2 Categories for Evaluation of Public Deposits. Government reduces the tax rate or even exempt the products from the tax category that are exported. Public finance has importance for both developing and developed economies. Public deposits are generally unsecured. iv. eval(ez_write_tag([[300,250],'commercemates_com-large-mobile-banner-1','ezslot_7',172,'0','0'])); Government generates its incomes through the collection of taxes from the general public using various public amenities and government uses these funds in the development and betterment of these public amenities.

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