When government encourages spending, Fixed Deposit interest rates fall, making them less attractive. Shares and Mutual Funds offer higher returns but are always risk prone. In between these comes the option of Company Fixed Deposits. Read more on fixed deposits, interest rate and their taxation.
What is a Company Fixed Deposit?With corporates trying to find sources of investment, they are coming up with the option of Fixed Deposits, where in they provide interest rates much higher than that prevailing in the market. One that is already available is Tata Motors Fixed Deposit. Unitech, one of the top construction companies in India had also come up with a similar option providing interest of 11% for an investment of 10,000 for a year. |
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| Company fixed (unlike Bank Fixed Deposits) are not guaranteed by the Government of India (FD s in banks are guaranteed by the govt up to an amount of Rs 1lakh). This means if company goes bankrupt, your Fixed Deposits in that company go ‘kaput’ as well. Read stories on Company fixed deposit frauds. | ||
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Before investing in a company, check the credentials of the company. In case of a listed company, you can take a look at the financial results of the company. If the company is making loss or not paying regular dividends to the shareholders, abstain from investing in such companies. Avoid companies offering interest higher than 15%. Such high interest rates are quite unrealistic.
Another factor to take a look at is the credit rating enjoyed by the company. Invest in fd’s of companies having a rating of double AA and above. A higher rating implies that company’s financials are sound and chances of defaulting are less. |
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Compare company fixed deposit interest rates before deciding to invest. Choose one which offers best returns with minimal risk. For comparison of various company fixed deposit interest rates check here.
Are Company Fixed Deposits as liquid as Fixed Deposits?Company Fixed Deposits are not very liquid instruments. In most cases, premature withdrawal is not allowed before three months. If you wish to withdraw between the third and sixth month, you may not get any interest at all. If you are forced to withdraw the money between six months and a year, you can get 3% less than the guaranteed return. You might have to run from one place to another and send loads of letters and some times even give reasons for Premature Withdrawals . Hence before investing in a company deposit, ask yourself whether you can actually part with the money for the term you have chosen for the deposit.  Company fd interest rates |
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