6 things you should know about company fixed deposits

by Manshu on June 21, 2010

in Fixed Deposits

I recently received a comment from a reader about investing in company fixed deposits, and I thought I should do a post about some important things to keep in mind while investing in company fixed deposits.  So, here is a post with a few pointers on company fixed deposit.

Company Fixed Deposits

Company Fixed Deposits

1. Company fixed deposits offer better interest rates than banks

You probably know this already but it is an important enough point to be on top of the list. Company fixed deposits will give you a higher return than comparative bank fixed deposits. This is because of the additional risk, for example the DHFL fixed deposit that was concluded a few months ago offered interest rate of 9% per annum, when the highest any bank was offering was 7%.

2. Additional risk

Company fixed deposits have higher risk than bank fixed deposits because these type of deposits are unsecured, if the company goes bust you will lose your money, and unlike banks, they don’t have any backing of the RBI. A lot depends on the performance and reputation of the company of course. A strong company that regularly pays out dividends and has no losses is perhaps a good bet, whereas a company that has made regular losses should raise eyebrows.

3. Company fixed deposits are rated by Rating Agencies

The rating agencies hand out ratings to the particular offering, and that can help you make a decision. For example, The Shriram Transport Finance FD scheme was rated tAA (investment grade) by Fitch. These ratings can help raise flags if any offering is rated low, and you can possibly avoid such fixed deposits.

There was a comment that asked what the RBI rating of a fixed deposit was, but RBI does not rate company fixed deposits, and in case of default by the company – RBI is not going to back them in any way.

4. Company fixed deposits may be unsecured

Company fixed deposits may be unsecured debt, which means there is no underlying collateral, and in case of default, you won’t get the funds back by selling off your documents.

5. TDS on Company Fixed Deposits

If the interest you get from the deposit is less than Rs. 5,000 in a year, then there won’t be any TDS on it. You can think about spreading your investments in multiple fixed deposits if you foresee a situation where your interest is going to be larger than Rs.5,000 from one fixed deposit.

6. You could keep a shorter horizon

Normally, a  higher time period will get you higher interest rates, but if you are not very comfortable with investing money in a company fixed deposit then you can select a shorter time frame like a  year.

Like most investing decisions, whether you invest in these things or not, and how much money you do will depend on your particular circumstances. If you prefer safety over everything else, then it is best to leave these things alone. If you have a moderate risk appetite then you might as well try investing money with some of the better known companies.

Image: Bhautik Joshi

Update: The earlier version said that company fixed deposits are always unsecured debt. This is not always true, in some cases they issue secure debt as well.

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{ 39 comments… read them below or add one }

SM June 23, 2010 at 10:33 am

Are the credit agencies paid by the company to give them a rating. If so, wouldn’t that represent a conflict on interest?
In India, there are multiple credit rating agencies like ICRA, CRISIL and CARE.
They do not cover all the companies. So what would be your suggestion in case a company is only covered by one of the agencies or there is a wide discrepancy between the ratings of a company between 2 agencies ?

Also, is there a way to know when companies advertise about their deposit schemes? Since many times it would seem that,by the time word gets out, its almost end of the enrollment period.

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MILAN MAHESHWARI July 14, 2010 at 11:07 pm

When investing in companies fixed deposit check their debt to equity ratio, profit history , dividend payout, nature of business and promoter background.For a company , taking money from public is a better option than from banks.Their cost of funding goes down ( depending on the sector).Interest rate spread for a bank is 3-4 % points above their FD rates . So when a company takes money from public it makes no difference to their interest cost but makes their life easy.Though the FD is unsecured in nature it still has its rights.Better park your money with NBFC than just housing finance companies or divide 60/40 in favor of NBFC .

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srikanth October 17, 2011 at 12:04 pm

hi there…
im srikanth,basically im new to this fixed deposit terms…so first of all which one is the better way to invest ur money as fixed deposits upto maybe 3-4 lakhs and wat should be done to avoid higher income tax implications on this terms…and also u have also mentioned abt NBFC… ,i would like to know the meaning for that…..thanks

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vimala August 2, 2010 at 3:11 am

very interesting one and very useful to everybody. want to now more about company deposits and other money related things , check over here
http://moneyrumors.blogspot.com

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MR.R.G.BHATTACHARYA September 27, 2010 at 10:02 pm

DEAR SIR,
I APPLIED FOR A FIXED DEPOSIT THROUGH “ICICIDIRECT.COM”ON 20/07/2010. MY APPLICATION NO- 7057736, THE MONEY HAS BEEN DEDUCTED FROM MY ACCOUNT, BUT SO FAR I HAVE NOT RECEIVED MY F.D. CERTIFICATE. COULD YOU PLEASE LOOK INTO THE MATTER AND INFORM ME AT THE ABOVE E-MAIL ADDRESS.
THANKING YOU.

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Manshu September 28, 2010 at 6:30 am

Sir, please contact ICICI Direct’s support and they might be able to help you. This blog is not affiliated to them in any way.

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reena November 22, 2011 at 1:31 pm

Hi Mr Bhargava

did you receive a reply? I too applied on Oct 7, money deducted but so far not received any certificate. It would be great help if you can let me knoe.

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Ritesh June 30, 2012 at 1:37 pm

Please send me a mail regarding this .. i will ask known person who is working in ICICI Direct

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Lifins October 12, 2010 at 11:13 pm

We provide distribution services of Company Fixed Deposit, NBFC Fixed Deposit, Govt. Companies Deposit, 54EC bonds of NHAI, REC, RBI Bonds, Infrastructure Bonds, Mutual Funds, Life Insurance, General Insurance.
Only Resident Indian Individuals, HUF through the Karta, Partnership Firms through partner, Corporates Banks, Financial Institutions, Insurance Companies, Mutual Funds, Provident/ Superannuation/ Gratuity/ Pension Fund, Private/Public Religious/ Charitable Trust, Co-op. Society can invest in above instruments.

To see the detail list and updated fixed deposits and T&C

Please visit our website or contact on below mention details
Office Address:
Lifins Financial
986/1, Senapati Bapat Road,
Opp. Ratna Hospital,
Between ATM of PNB and Vidya Sahkari Bank,
Pune 411016
Maharashtra, India.
Mobile No: 9822403407, 9371011297
Email Id: sk@lifins.in
Website: http://www.lifins.in
Company Fixed Deposits as on Oct 2010
COMPANY NAME RATE OF INTEREST ( %) p.a Additional Rates MINIMUM INVESTMENT
PERIOD 6M 12M 18M 24M 36M Sr. Citizen Shareholders Employee
ALEMBIC LTD - 7.00 - 8.00 9.00 50000/-
ANKUR DRUGS & PHARMA LTD - 10.00 - 11.00 12.00 0.25 0.25 0.25 25000/-
ANSAL PROPERTIES & INFRASTRUCTURE LTD 11.50 12.00 - 12.25 12.50 50000/- & only Scheme B
APOLO HOSPITAL ENTERPRISES LTD (05.11.2009) - 8.00 - 8.25 8.75 25000/-
ASIAN ELECTRONICS LTD 9.00 10.00 - 11.00 12.00 0.25 0.25 0.25 5000/-
BIRLA POWER SOLUTIONS LTD - 10.50 - 11.00 11.50 0.50 10000/-
CHD DEVELOPERS LTD 11.00 12.00 - 12.00 12.50 10000(1,2 & 3YR) & 25000(6M)
DARCL LOGISTICS LIMITED 8.50 9.50 - 9.25 9.00 0.50 0.50 5000/-
DCM SHRIRAM CONSOLIDATED LTD - - 8.50 10000/-
ESSIX BIOSCIENCES LTD - 10.50 11.00 11.50 0.50 10000/-
FENNER INDIA - 8.00 - 8.25 8.50 20000/-
FIRST LEASING COMPANY OF INDIA LTD - 8.00 8.25 8.50 8.75 5000/-
GATI LTD - 9.00 - 9.50 10.00 0.50 0.50 21000/-
GODREJ INDUSTRIES LTD - - - 8.00 8.50 20000/-
GUJARAT APOLLO INDUSTRIES LTD - 9.00 - 9.50 10.00 200000/-
HELIOS & MATHESON LTD - 10.00 - 10.50 11.00 25000/-
J K LAKSHMI CEMENT LTD - 8.00 - 8.50 8.50 20000/-
J.K.PAPEER LTD - 8.00 - 8.25 8.50 10000/-
JAI PRAKASH ASSOCIATES LTD - 10.50 - 11.00 11.50 20000/-
JAPYEE INFRATECH LTD - 10.50 - 11.00 11.50 20000/-
JK TYREE AND INDUSTRIES LTD - 8.00 - 8.25 8.50 20000/-
LYKA LABS LTD (ONLY SHAREHOLDERS) 10.00 10.50 - 11.00 12.00 0.50
MAHINDRA & MAHINDRA FINANCIAL SERVICES LTD - 8.00 8.25 8.50 9.00 0.25 10,000/-
MUKAND LTD (ONLY RENEWAL) - 8.50 - 9.00 10.00 0.50 25000/-
NEESA LEISURE LTD 11.00 11.25 - 11.75 12.00 0.50 0.50 25000/-
PRISM CEMENT LTD ( H R JOHNSONS LTD) - 8.50 - 8.50 8.50 10000/-
SEJAL ARCHITECTURAL GLASS LTD 8.75 10.00 - 10.50 11.00 0.50 0.50 10000/-
SHRIRAM UNNATI FIXED DEPOSIT - 8.75 - 9.50 10.00 25000/-
SOLARIES CHEMTECH LTD - 10.00 - 10.50 11.00 20000/-
UNITECH LTD 11.00 11.00 - 11.50 12.00 0.50 0.50 0.50 10000/-, for 6M &SchemeA=25000/-
UNITED SPIRITS LTD (reopen till 09 oct) - 11.00 - 11.50 -
ZENITH BIRLA (INDIA) LTD - 9.00 - 10.50 11.00 10000/-
NBFC Fixed Deposits
COMPANY NAME RATE OF INTEREST ( %) p.a Additional Rates MINIMUM INVESTMENT
PERIOD 12M 24M 36M 48M 60M 84M Sr. Citizen Shareholders Employee
CANFIN HOMES LTD 7.05 7.25 7.60 7.60 7.60 7.60 0.50
DEWAN HOUSING FINANCE CORP.LTD (AASHRAY PLUS) 9.00 9.10 9.25 9.25 9.25 9.25 0.25 0.25 0.25
EXIM BANK 6.75 6.75 7.50 - 7.50 - 0.50 10000/-
GRUH FINANCE LTD 7.50 7.75 8.00 8.00 8.25 8.25 0.25
HDFC (IND ) – REGULAR <1 CR 7.50 7.75 7.90 7.90 8.25 8.25 0.25 20,000/-
HDFC (TRUST) 7.50 7.75 7.90 7.90 8.10 8.10
HUDCO (w.e.f 24Aug) 7.25 7.50 7.75 7.75 8.25 8.25 0.25
ICICI HOME FINANCE DEPOSIT < 1 CR. 7.10 7.60 7.75 7.75 7.75 - 0.25 10000/-
LIC HOUSING FINANCE LTD 7.00 7.40 7.65 - 8.10 - 0.25 10000/-
NATIONAL HOUSING BANK (SUNIDHI SCHEME) 7.25 7.50 8.00 - 8.25 - 0.5 50000/-
PNB HOUSING FINANCE LTD (HALF YRLY) (w.e.f 13Aug) 7.50 7.50 8.00 8.00 8.25 8.25 0.50 20000
SARDAR SAROVAR -NARMADA NIGAM LTD 5.50 6.50 8.00 - - 8.00 10000/-
SHRIRAM TRANSPORT STRAIGHT BOND (NCD) (w.e.f. 13Sep) 8.25 8.75 9.75 9.75 9.75 - 10000/-
SIDBI (w.e.f 01 Sep'10) 7.00 7.25 7.50 7.50 7.50 - 0.50 10000/-
TAMILNADU POWER FINANCE 7.75 8.25 8.75 8.75 8.75 - 0.25 10000/-
Only Renewal
COMPANY NAME RATE OF INTEREST ( %) p.a Additional Rates MINIMUM INVESTMENT
PERIOD 6M 12M 18M 24M 36M Sr. Citizen Shareholders Employee
ANSAL HOUSING & CONST LTD (ONLY RENEWALS) 11.00 12.00 - 12.00 12.50 20000
CNBC TV 18 (ONLY RENEWALS) (w.e.f 01Sep'10) 9.00 11.00 - 11.00 11.00 0.50 0.50 10000/-
JINDAL SAW LTD (ONLY RENEWALS) 6.75 7.25 - 8.25 9.50 0.25 15000/-
JSL LIMITED (ONLY RENEWAL) - 8.25 - 8.50 8.75 0.25 0.25 0.25 21000/-
JCT LTD (ONLY RENEWAL) - 10.50 - 11.00 11.50 10000/-
MILKFOOD LTD (ONLY RENEWAL) 9.00 9.50 - 10.00 10.50
PEARL POLYMER LTD (ONLY RENEWAL) 10.00 11.00 - 10.00 10.00 10000/-
RAVALGAON SUGAR FARM LTD (Only Renewal) - - - 8.00 9.00 0.25 0.25 10000/-
SURYA ROSHINI LTD (Renewal) - 10.50 - 11.00 11.50 25000
SUPREME PETROCHEM LTD - 8.50 - 9.00 9.50 0.25
Closed
CEAT LTD (Closed) - 8.50 - 9.00 9.50 25000/-
DEEPAK NITRITE LTD (Closed) - 7.75 - 8.00 8.25 10000/-
GODREJ PROPERTIES LTD (Closed) - 8.25 - 9.00 9.75
IBN18 BROADCAST LTD (Closed) 9.00 12.00 - 12.00 12.00 0.50 0.50 10000/-
IND SWIFT LTD (Closed) - 10.50 - 11.00 11.50 0.50 10000/-
IND SWIFT LABORATORIES LTD (Closed) - 10.50 - 11.00 11.50 0.50 10000/-
JAGATJIT INDUSTRIES LTD (Closed) 10.00 10.50 - 11.00 11.50 25000/-
JINDAL STEEL AND POWER LIMITED (Closed) - 8.00 - 8.25 8.50 10000/-
SHRIRAM PISTON AND RINGS LTD (Closed) 7.50 9.50 - 10.00 10.50 21000/-
NETWORK 18 MEDIA & INVESTMENTS LTD (Closed) 9.00 12.00 - 12.00 12.00 0.50 0.50 10000/-
UNITED BREWERIES (HOLDINGS) LTD (Closed) - - - 11.00 11.50 0.25 25000/-
TALBROS AUTOMOTIVE COMPONENTS LTD (Closed) - 10.00 - 11.00 12.00 10000/-
KERALA TRANS DEVELOP FINANCE CORP LTD (closed) - 9.00 - 9.00
* Interest structure may be revised by company from time to time. Pls confirm Interest rates before submitting the application.
"Pune, Maharashtra. Mobile No: 9822403407, 9371011297 Email Id: sk@lifins.in Website: http://www.lifins.in
"

Reply

Ishita Sharma November 9, 2010 at 12:24 pm

Fixed Deposit (FD) is basically an investment made for a fixed period of time resulting in a higher rate of interest in return. This is best suited for investors with a low risk appetite and who wants to invest a large sum of money to earn a fixed rate of interest.

http://www.investmentbazar.com/fixed-deposits-investment/

Reply

Ishita Sharma November 9, 2010 at 12:25 pm

You might have come across this dilemma, which investment product to choose – ULIP or Fixed Deposits? First let’s understand what these two products -

ULIP vs Fixed Deposits – Which to choose?

Click here – http://www.investmentbazar.com/ulip-vs-fixed-deposits/

Reply

ram mohan May 13, 2011 at 3:22 am

FDR receipt is not received by me of following FDR Name RAM MOHAN FDR NO.C00113033 &00113033 Ref.no. JAL:FDR:2009-2010

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krantivir July 24, 2011 at 7:13 pm

This is an excellent forum for knowledge regarding various finance instruments. I don’t why people in this blog give their FD numbers etc and ask to look into their matter. Its your problem
so take knowledge from this forum and ask directly to the concerned company and get it solved.
Simply Simple.

Reply

anjali September 25, 2011 at 7:24 pm

Dear sir”/ma’am

i want to invest my money in samrudha primecircle investment plans kindly suggest me whether i invest or keep away from it…

Thanks & Regards
…..anjali singh….

Reply

Manshu September 25, 2011 at 8:59 pm

I’m afraid I don’t know about this – heard the first time from you today so won’t be able to comment on this.

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anjali September 28, 2011 at 9:55 pm

may i have ur mail id on which i”ll send u some of the leaflet of company and its investment product……!!!!!!!

Reply

srikanth October 17, 2011 at 12:24 pm

hi all…
i m srikanth,basically im very new in this, can any body suggest me what is a better option to invest as a fixed deposits upto 4-5 lakhs and also with lower income tax implications on that…..and if any one can give me a specific names about the companies would be more appreciated….thanks all for ur support..

ml_srik2006@hotmail.com

Reply

Manshu October 18, 2011 at 11:00 pm

Srikanth – All FD interest are taxable in the manner so that doesn’t make much difference. Here is a list of high paying fixed deposits, and you can see which bank is accessible and convenient to you and open a FD there.

http://www.onemint.com/2011/01/14/banks-with-high-interest-rates-on-fixed-deposits/

Reply

GANESH December 2, 2011 at 10:32 am

f.d where to invest in banks or companies and if banks then which bank

Reply

Giri January 4, 2012 at 3:40 pm

Just a clarification. If the interest per deposit is less than 5000 per then there is No TDS. Doesn’t mean there is no Tax. You still have to assess the pay the tax. This is only for people who are not under the bracket for attracting tax. Others who are in the bracket attracting tax you can ensure that you pay it as part of self assessment instead of TDS.

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ghanshyam m patel January 25, 2012 at 8:21 pm

ankur drughs have not paid maturity payment oct-2011 till date
and interest also i read yor web site your sujest ankur drugh

Reply

Ranjana Vasant Bapat March 8, 2012 at 8:27 pm

FDR recipt not recieved. Maturity Proceeds not recieved.

FDR No. 5109005510 – Ranjana Vasant Bapat

Reply

Rohit Varma February 9, 2013 at 6:12 pm

Hi Manshu,

Hope you are doing good. It will be great if you can clarify my concern.

Company deposit of NHB(National Housing Bank) is available which is providing 9.25% compounded annually (cumilative payout). The total amount at the end equals somewhat Rs 107250.

Now lets say I go for a bank fixed deposit which is 7.25%. Now this is compounded annually which amounts to Rs107449. So do you think going with Bank FD is better as compared to Company Deposit for this.

Reply

Manshu February 10, 2013 at 5:07 am

Hi Rohit.

I am doing well, thanks for asking.

The difference between a company fixed deposit and a bank fixed deposit is that a bank one is regarded safer since bank failures are rare and RBI guarantees savings of up to Rs. 1 lakh.

Practically, however if you ask me what’s difference between the safety of the deposit of NHB and say Axis Bank – I don’t know the answer to that. If you want the higher return you can opt for it but you need to be cognizant of the higher risk. I usually say that people should spread around their investment, specially debt investment since there is no upside in that.

Reply

Rohit Varma February 9, 2013 at 6:29 pm

Hi Manshu,

Did wrong calculation…

NHB compounded annually (9.25% ) gives Rs109250 and Bank FD(7.25% compounded quarterly) gives 107449.

Reply

Lekhraj Gupta April 4, 2013 at 1:29 pm

In your opinion and considering today market scenario and when bank FD interest rate is going down, which NCD is secure (not secured by govt but company only) and can give more return.

I know this is very complex but I need just your opinion.

Regards
Lekhraj

Reply

Manshu April 9, 2013 at 5:58 am

I haven’t looked at many FDs lately so unable to answer this.

Reply

Devavrat Parvate April 10, 2013 at 11:30 am

What is the taxation on Shriram Straight bonds? Is Indexation is allowed on the same or normal taxation of FD is applied?

Reply

Manshu April 14, 2013 at 7:45 pm

I am not sure about this one particularly, but if it is just a bond then that should follow the rules of bonds – what’s the difference between this and other bonds, do you know?

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Gary May 14, 2013 at 1:38 am

Hi,

I am planning to invest in STFCL’s Shriram Unnati Fixed deposit. The Credit Rating is good for the FD. Could you please suggest whether investing for 3 years in this FD will be a good decision?

Reply

kedar June 5, 2013 at 12:01 pm

I seek your guidance.
I hv invested in Birla Power and Ankur Drugs & Pharma, both the companies are not paying interest as well as maturity amount.
What is the remedy? Is there any website or portal or grahak manch where we can lodge a complaint against these cos?
Also pls advise if approaching to CLB would help.

Reply

HIMANSHU UPADHYAY June 30, 2013 at 10:38 am

Hi all,
I want to sensitize the public against the malpractices being followed by the company Sejal alias Sezal, etc in offering company FDs at attractive interest rates of 15 % or higher…
I invested Rs 20k in Feb 2000 in a three year FD. On maturity of the same, I have got only the interest amount of around Rs 8.5k and the principal has not been returned.
I have tried to contact the company offices and their registrar, M/s Link Intime through post, e-mail, telephone, etc for the past three months, but there has been no response through any modes of communication.
I have complained to the company law board mumbai and the disposal is awaited.
So, ,please all those who have invested, try and get immediate redemptions, if possible…. and those who planned to invest….please don’t think that these FDs are good interesting earning tools.
So much so that the registrar, M/s Link Intime who manages several thousand crores worth of investments, doesn’t seem to care and reply to investors. So carefully scrutinize any type of investment with Link Intime and choose someone else. Additionally, the company now continues to offer new FDs under a new name Sezal or alias,etc..None of its e-mails work or are responded.

In the hope of preventing others to fall in trap of these crooks….
Himanshu

Reply

adiseshan June 27, 2014 at 10:16 am

Mr Himanshu…We too are in a similar situation like yours. We had invested Rs. 4 k in Sejal Glass on 5 May 2011 for 2 years and we got partial interest in July 2013. The balance interest and principal still eludes us despite innumerable visits and phone calls to their Office. Like you said , they have not replied to my letters and emails either. If there is any ruling from Company Law Board based on your complaint , would request you to please share it, as CLB website is no longer accepting investor complaints.

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moonshekar June 24, 2014 at 4:02 pm

I have a fixed deposit with Ansal properties & infrastructure ltd.

I have not received any interest for this financial year.

There is no notification on the reason for non payment and no proper contact to follow up with.

Please be careful when investing with Ansal properties & infrastructure ltd

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Rachita Gogate July 24, 2014 at 11:17 am

We had placed an FD of Rs 50,000, with Helios and Matheson in June 2012 for 2 years. We were issued all the cheques regarding the interests as well as the original amount for presenting to the bank at appropriate times.
After maturity, in July 2014, when the cheque for the FD amount was presented it was not honoured and returned with the remark that the party had stopped payment.
After many attempts also the company site could not be opened. We are therefore not in a position to contact anybody from the company.
Could any one inform me the e-mail address of the person to be contacted ?
What are the options available for claiming FD amount ?

Rachita Gogate

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C R Rangarajan July 28, 2014 at 9:02 pm

Hello Rachita, Reg. Helios Matheson, I am also in the same boat. Our FD cheque & interest cheques were stopped payment by company. I spoke with company person at Mumbai office (Rupesh). He promised that they are awaiting funds and will be cleared within 6 months. Asked me to send FDR, bounced cheques copies by scanning them. Also include bank charges proof. Email id: rupesh.b@heliosmatheson.com. We may have to wait. I wonder bouncing a cheque is criminal offence. How a company can do it?

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SK agarwal August 13, 2014 at 9:18 pm

Same happened with me also awaiting reissue of bounced cheque since 05.07.2014

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Ravi July 30, 2014 at 12:59 pm

Hi Manshu,
I am new to fixed deposits and like to take up your advice. I have one lakh rupee that I have planned to split into 3 (40,40,20) and invest in DHFL, Tamilnadu power finance and Mahindra finance for 3 years. I have planned to take it on my wife’s name, who is currently not working, so that I can avoid paying any TDS. Is my planning is the best one? Is the company that I have chosen is the best companies in paying highest interest and security, based on their history? Can you please suggest whether I need to change my plan?

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SK agarwal August 13, 2014 at 9:10 pm

Redemption cheque bounced on 29.06.2014 sent for reissue on 05.07.2014 but not yet received. Pl help regards SK agarwal

Reply

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