Tuesday, 16 November 2010

Choose a good company for investing in Company Fixed Deposits.


Investment in Company Fixed Deposits is an interesting investment option. Companies take fixed deposit from public and them offer comparatively a high return with Fixed Deposits in Banks. If companies borrow from banks, they have to pay high interest. So company takes money from public as Fixed Deposit and gives 2 to 3 % more interest than banks offer to public for Fixed Deposits. Most of the companies are paid these interests on monthly, quarterly, half yearly or yearly basis or at the time of maturity through cheques, Electronic clearing etc.

If the interest in a year is more than Rs. 5000 they will deduct TDS.

Reserve Bank of India allows a company having ‘A’ rating to accept fixed deposit from public, but better to invest in AA or AAA schemes. If the ratings or two companies are same, go for the company with good reputation. Then go for the scheme which gives you better return. If you don’t need regular income, take cumulative option with regular income which accumulate and reinvest the regular return which automatically reinvested and ultimately you could harvest a better return and at last you will get a lump sum amount.

Make the deposit period short within 1 to 3 years, so that you can watch the rating of the company and can get back money in emergencies. Check the investor oriented service of the company which is prompt payment of interest and principal amount.

Only Companies registered under Companies Act 1956 which includes Manufacturing companies, Non Banking Finance Companies, Housing Finance Companies, Financial Institutions, Government Companies etc. can accept Fixed Deposits from public. A Manufacturing company can accept10% of the total paid up capital and reserves, if the investors are share holders of the company, unless 25% of the total paid up capital and free reserves. But a Non Banking Finance Company can accept fixed deposit which is equal to 4 times of its net fund amount, if it s a leasing company, but a loan or investment company can accept 50% of their net owned funds.

Duration of Fixed Deposits

The time period of fixed deposits from different nature of company varies. While a manufacturing company can accept fixed deposits from 6 months to 3 years, a Non Banking Finance Company can accept fixed deposits from 1 year to 5 years and a housing finance company can accept fixed deposits from 1 year to 7 years.

You should not invest, if a company allows more than 15% interest or not paying regular dividends to share holders, Companies which have a balance sheet shows loss or the companies which has low investment ratings.

Totally Company Fixed Deposits are interesting investment option, only if you invest carefully, No doubt you must handle it with care.





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