Credit rating agencies such as CRISIL and ICRA, rate companies based on their financial stability and creditworthiness. NBFC (Non-banking financial company) , mandatorily, need an ‘A’ rating to be able to accept public deposits. #fixeddeposit #interestrate #SBT

1. Important factors to consider
when investing in company fixed
deposits

2. ● Credit Rating
● Interest Rates
● Security
● Taxability
● Deposit tenures
● Scheme Type
● Premature Withdrawals

3. Credit Rating
● Credit rating agencies such as CRISIL and ICRA, rate
companies based on their financial stability and
creditworthiness. NBFC (Non-banking financial company) ,
mandatorily, need an ‘A’ rating to be able to accept public
deposits. ‘AAA’ and ‘AA’ ratings indicate high degrees of
stability, making deposit schemes from companies with such
ratings, a safe bet.

4. Interest Rates
● Most companies offer higher returns than banks. However,
depositors should be wary of schemes that feature very high
rates. The current range of interest rates on company fixed
deposits is 9% - 15%. Returns crossing this range should be
looked at with caution, based on the company’s reputation.

5. Security
● Funds held with a company as deposits are not covered by
company assets or assured by a regulatory authority,
making them unsecured holdings. If a company defaults or
winds up, depositors stand to lose all their holdings. This
extra risk depositors bear, compels companies to offer higher
returns.

6. Taxability
● Interest earned on corporate FDs is taxable. Moreover, for
interest in excess of Rs.5,000 in a financial year, tax will be
deducted at source. Investors should consider net returns,
accounting for tax, when determining profitability of these
schemes.

7. Deposit tenures
● Deposit periods on schemes offered by non-banking
companies range between 6 months and 10 years. Of these,
short-term schemes are considered safer as a company’s
stability is not generally affected over a period of 1-3 years,
thereby maximising returns without compromising on safety.

8. Scheme type
● Fixed deposit schemes offered by different companies may
either be cumulative or non-cumulative i.e. interest may or
may not be compounded (at varying frequencies). Some
companies offer special rates to senior citizens and
employees. Cumulative options are preferable for investors
prioritising returns over liquidity.

9. Premature Withdrawals
● Companies have differing rules regarding early closure or
partial withdrawals of deposit accounts. While some
companies may not permit premature withdrawals, some
may only do so subject to completion of a certain period of
time and on payment of interest penalties.

10. Thank You
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