Many companies accept Fixed deposit from investors, typically for short period from 6 month to 3 year span. These are just like bank fixed deposit but lesser liquidity and usually carry higher risk and return. The attractive returns on such deposit draw many investors to channel their savings into such deposit.
This result in mobilization of household savings for utilization in productive purposes by corporate sector.
Key feature of Company Fixed Deposit
- Fixed deposit scheme offer by company. Similar to Bank Deposit
- Not a safe as a Bank deposit. Company deposit are "Unsecured"
- Offer Higher returns than bank FDs, since they entail higher risks
- Rating can guide to their safety.
Right of Deposit Holders
- Right to receive periodic interest payments on time
- Right to receive intimation regarding any amendment to the terms of repayment of deposits.
- Right to receive the amount of matured deposit on time
- Right to file complaint in the prescribed format before Company Law Board in case of default in repayment of deposits.
DO's for investing in Company Fixed Deposit scheme
- Do check credit rating assigned by the credit rating agencies to the fixed deposits being considered.
- Ignore unrated Fix Deposit scheme
- Understand the background and credibility of the promoters.
- Choose company with a better track record for similar rated companies.
- Always have a nominee for the deposits made by you
- Don't investment all part of saving in Fixed deposit or single company.
- Don't invest in companies that care little about investor services
- Don't get lured by high interest rates
- Don't hesitate to seek regulators assistance for any grievance
- Check for financial performance of the company.
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