Company Fixed Deposits and how to choose Fixed Deposit

21 November 2020 3:31:PM

What_is_company_fixed_deposit

A fixed deposit plan refers to an insurance arrangement that banks and non-banking finance firms have. A Fixed Deposit plan can give better returns on the principal invested as compared to the returns produced by a standard savings account.

Set deposits, hence the name, have a fixed period. The Fixed Deposit investment duration may either be short-term or long-term, depending on the investment portfolio of a customer. The interest rates differ from one business or bank to another on fixed deposits.

Company Fixed Deposit:-

Corporate Fixed Deposits or Business Fixed Deposits are saving cum savings instruments provided by Non-Banking Financial Companies or NBFCs. These corporate or business fixed deposit schemes are backed by higher FD (as opposed to bank FD rates) interest rates. A Company Fixed Deposit can give better returns on the principal invested as compared to the fixed deposit offered by Banks. 

What is a company Fixed Deposit?

A company fixed Deposit is usually offered by Companies incorporated in India. Usually, companies listed on the stock exchanges are preferred. The companies offer a deposit for a fixed period ranging from 1 year to 5 years. Companies with good credit ratings ie AAA are recommended.

Why Company Fixed Deposit?

Company Deposits are similar to bank fixed deposits, they offer a fixed interest rate and a  fixed period of deposit. The interest options can be monthly, quarterly, half-yearly, and yearly.

How does company deposits differ from bank fixed deposit?

Company deposit differs from bank deposit in the following ways:

Interest Rate:

  • Normally company deposit offers a higher rate than a bank deposit.

Flexibility

  • Interest is paid monthly, quarterly, half-yearly. this enables a person to match their expenses with their interest in a better manner

Ratings

  • AAA-rated companies like HDFC, LIC housings, and Mahindra and Mahindra finance are some examples

Can I withdraw my company fixed deposit before maturity?

Fixed Deposits are for a fixed period. In most companies, you can prematurely withdraw the amount after initial lock-in period of 6 months, is completed. There is a cut in interest rate if you withdraw before the term of the deposit is complete

How will I receive my interest payment?

Corporate Fixed Deposits pays interest on interest payment date that is

  • Monthly (End of every month),
  • Quarterly (End of every quarter i.e. end of March, June, September, and December).
  • Half-yearly (End of every half year i.e. end of March, September).
  • Yearly –( End of each financial year i.e. End of March)

The interest normally paid directly to investors’ bank account.

How should I choose a company fixed deposit?

The company fixed deposits are selected on investor time frame and rate of return. Along with this the main criteria to select the company is the Rating of the company. The highest rating shows the possibility they will pay-off principal as well as interest to unitholders.  As the rating goes lower the credit risk increases and it will increase the rate of return also to investors.

AAA is the highest possible rating that may be assigned to an issuer by any of the major credit rating agencies. AAA-rated bonds have a high degree of creditworthiness because their issuers are easily able to meet financial commitments and have the lowest risk of default.

How can I apply for a company fixed deposit?

For the application of fixed deposits, all holders (minimum 1 and maximum 3) should comply with KYC Norms. The KYC documents are as below

Latest photograph of all holders.

Certified copy of the proof of identity (Passport, PAN (Mandatory), Voters ID, Driving License, Aadhar Card

 Certified copy of the proof of address. – (Passport, Aadhar Card, Utility bill) which is not more than two months old from any of the following service provider – electricity, telephone, post-paid mobile phone, piped gas, water bill

Certified copy of the proof of signature

Offline / Online Application:

After documents are ready investor can apply for fixed deposits through offline or online mode.

Can I have a nominee in my fixed deposits?

Every fixed deposit allows having nominee in their FD. Some company allows up to 3 nominees also.

 

RATE OF RETURN OFFER BY CORPORATE FIXED DEPOSIT:

HDFC LTD is offering the following options to depositors

Period

Monthly Income Plan

Quarterly Option

Half-Yearly Option

Annual Income Plan

Cumulative Option

33 months

5.65%

5.70%

5.75%

5.85%

5.85%

66 months

6.05%

6.10%

6.15%

6.25%

6.25%

 

 

 

 

 

 

15 months

5.50%

5.55%

5.60%

-

5.70%

22 months

5.60%

5.65%

5.70%

5.80%

5.80%

30 months

5.55%

5.60%

5.65%

5.75%

5.75%

44 months

5.90%

5.95%

6.00%

6.10%

6.10%

 

 

 

 

 

 

12-23 Months

5.45%

5.50%

5.55%

-

5.65%

24-35 Months

5.45%

5.50%

5.55%

5.65

5.65%

36-59 Months

5.75%

5.80%

5.85%

5.95%

5.95%

60-84 Months

5.85%

5.90%

5.95%

6.05%

6.05%

Min. Amount

50000†

40000+

20000+

20000+

20000+

Note: Senior Citizen additional 0.25% fixed deposit interest rate

 

It was all about the Company fixed deposit and why to choose one. In our knowledge series, we will be back with other various investment options and information that you need to know before investing.