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.
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.
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.
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.
Company deposit differs from bank deposit in the following ways:
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
Corporate Fixed Deposits pays interest on interest payment date that is
The interest normally paid directly to investors’ bank account.
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.
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.
HDFC LTD is offering the following options to depositors
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.