Most of the Indian while investing their money prefer to invest with banks only. As they believe investing in banks is more safe and secured way of investing the money. For most of the investors higher returns with safe investments matters a lot. That’s why most of the people want to invest in fixed deposits as this is one of the least risky investment tool. It ensures safe investment along with assured returns on maturity. In the last few years, the investors are looking for other ways as well to invest their money and increase it. Now, people also want to invest in company fixed deposits as well to reap higher returns. However, the company fixed deposits are almost similar to bank fixed deposit, but these companies offer a little higher rate of interest as compared to banks. Most of the terms and conditions related to fixed deposits are more or less same as bank deposits. Financial institutions and non banking financial companies offer these fixed deposits on different rate of interest for different tenure. The minimum limit to deposit the money in these fixed deposits varies from company-to-company.
What makes company fixed deposits more popular? Company fixed deposits are more popular among people because of various reasons. But, the most important reason is it offers higher rate of interest as compared to banks. Even it offers different and higher rate of interest to senior citizens and their employees. But, you should not forget that every thing has its flip side. You should always pay attention to the other factors linked with these fixed deposits before making investment. What are the factors which you should consider before making the investment? You should always check and consider the below mentioned points before investing in fixed deposits of financial institutions and non-banking companies.
Interest rates: These non banking companies lure customers with higher rate of interest in these fixed deposit schemes. Most of these companies offer higher rate of interest as compared to average rate of interest offered by banks. But, if the company is offering you way too high rate of interest then you should also check the risk factor and market value of that company before investing.
Tenure Vs interest rate: In most of the fixed deposits, the longer the duration of the investment, the higher the rate of interest you will get on your investment on fixed deposit. The biggest risk on corporate fixed deposit is default risk. The company offering Fixed Deposits may not serve the interest and maturity payments on time. So, don’t consider investing for longer duration with these companies if you have any doubt regarding the image and market value of the company.
Diversification of investment: Always invest your money into different schemes instead of investing your money into one scheme or company alone. If you have a good amount of money don’t invest that into one saving option, diversify your investment into different channels.
Credit Ratings: Before investing into any company or financial institution, always check the past history of the company. How prompt or slow is it in paying the amount? What is the market value and presence of the company? How good it’s being rated among the competitors? If you think that it is a bit difficult to dig the information about the company you can check the credit ratings that are shown by these FD schemes. Remember, if the credit rating of the fixed deposit is good, then that specific scheme may offer lower interest rates when compared to a poorly rated FD scheme. Therefore, higher rating ensure more security and safety of your money, whereas it also indicates lower returns as compared to other companies with lower ratings. Rating agencies such as ICRA, CRISIL, CARE etc., are main companies to rate these Fixed Deposits on the basis of risk factors linked with them.
(Updated on:1 November,2016)