6 things you should know about company 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.

66 thoughts on “6 things you should know about company fixed deposits”

  1. 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.

    1. 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.

  2. FDR recipt not recieved. Maturity Proceeds not recieved.

    FDR No. 5109005510 – Ranjana Vasant Bapat

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

  4. 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.

  5. 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

  6. 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….

  7. 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.

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

  9. 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
    "

  10. 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.

    1. 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.

  11. 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 .

    1. 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

  12. 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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