You would have heard about Corporate FD’s. Even if you haven’t, presently you are reading about Corporate Fixed Deposits.
What is a Corporate Fixed Deposit?
Corporate Fixed Deposits (CFDs) are deposits that get circulated by private and public companies that work just like Bank Fixed Deposits (FD). An interest rate is offered and there is maturity duration for company durations. Either you go for cumulative option or go for non-cumulative option. In the cumulative option, your interest is added in deposits while in the non-cumulative option, you are paid interest at the end of each duration.
A bank FD is offered by banks while the corporate FD is offered by companies. However, corporate FD works similar to bank FD albeit certain changes. Compared to bank FDs, corporate FDs give higher rate of interest due to the fact that in corporate FDs there is higher risk.
Is it imperative for you to invest in a corporate fixed deposit?
“Why do companies offer higher returns?”
The reason is simple. Any organization needs money for expansion and for funding projects. They can either take loans from banks or take measures that cost them lots of money. Hence they operate corporate FD where regular investors like you can invest at their deposits, thus earning larger returns.
Are Corporate Fixed Deposits safe?
Along with high returns, there is also high risk since you have little to no idea how company will perform eventually or how a particular project will turn out to be in the forthcoming times.
After ages pass by, will they be able to repay your money and how much will they be able to repay?
Banking rules don’t apply to Corporate Fixed Deposits. If you are under the impression that corporate fixed deposits are regulated by Reserve Bank Of India (RBI) regulations, you couldn’t be more incorrect. Deposits under Corporate deposits are governed by provisions of 73 to 76A of the Companies Act 2013 (section 58-A of The Companies Act 1956) wherein you can’t do much if the company isn’t paying you on time. Verify the company’s credit rating before investing with them.
If yearly interest exceeds Rs 5000, TDS is deducted at 10%. For three to six months, premature closure of company fixed deposits isn’t possible. It is always advisable to invest for shorter durations like six months or one year due to the risk involved.
Avoid investing all the money in one company. Experts recommend splitting money in various companies to diversify risks. They also recommend going for companies with AAA or AA rating, nothing less. When you invest in a Corporate Fixed Deposit, you have to name a nominee who will receive the amount in the unfortunate case of your premature demise.
Additional Interest is offered for Senior Citizens:
You read that right! Senior citizens receive additional interest rate of 0.25% p.a. under Mahindra Finance fixed deposit and 0.75% p.a. in ICICI bank fixed deposit. These calculations are for a 3 year tenor and are pre-tax but results will differ everywhere. [To Get Fixed Deposit Advice From Financial Experts]
For more information visit www.moneymindz.com or give a missed call to 022-621165
For More Information :