All you wanted to know about company fixed deposits

Prakash Patil
/ Categories: Trending, Markets

Investors who expect rate of interest that is higher than that of banks on their fixed deposits can invest in fixed deposit schemes of various companies. The company fixed deposit schemes come in various tenures ranging from 6 months to 7 years, depending on the nature of company’s business. Manufacturing companies can accept deposits for a duration of six months to three years, NBFCs for a period of one year to 5 years and housing finance companies for one year to 7 years.

It must be noted that company deposits are not secured investments and are, therefore, comparatively risky investment propositions.Therefore, investors need to exercise due diligence before deciding on which company to invest in, how much to invest and the duration of investment. The well-established and reputed companies go for rating of their deposit schemes by rating agencies, so one can go for deposit schemes with rating of ‘A’ or higher ratings such as AA or AAA. In other words, investors should avoid investing in deposit schemes of companies that are rated below ‘A’ or are not rated by any rating agency.

Also, investors should not be lured by deposit schemes of a company that offers abnormally high rate of interest of, say, 18% or more, as the financials of the company may not be sound. Remember, the safety of capital is paramount and should not be compromised for the lure of higher returns. The safety of capital is inversely related to returns, that is, higher the returns, lower the safety, and vice versa. So, investors should invest only in companies that are financially sound and have a good track record of rewarding their shareholders and investors.

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