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FIXED DEPOSITS
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Form 15G / Form 15H
OVERVIEW Your results on : Fixed Deposits | Overview
Company Fixed Deposits are the fixed deposits schemes offered by a company and it earns a fixed rate of return over a period of time. Such deposits are also accepted by Financial Institutions and Non-Banking Finance Companies (NBFCs). Company Deposits offer higher rate of interests than normal Fixed Deposits.

Why invest in Company Fixed Deposits?
Company Fixed Deposits are mixed bag like most of the investment option. Here are some of the points that you should keep in mind.

Diversify your Risk :
Your deposits should be spread over a large number of companies engaged in different industries. This way, you'll be able to diversify your risk among various industries/companies. Try not to put more than 10% of your total investments in one particular company.

Choose the Right Period of Deposit :
Ideally the investment should be for 1 to 3 years depending upon the rate of interest.

Periodic Review :
At maturity, the performance of the companies should be reviewed as this will help you decide whether to renew or reshuffle the deposit. It is also wise to keep a track of these companies by checking their share prices, annual reports and other details reported in newspapers.

How to choose a company for investing in FDs?

Corporate Fixed Deposits attract more investors by their higher interest rates and wider options. Yet, assurance of a fixed return doesn't make company FDs risk-free. If the companies are financially unstable they may not be able to pay the interest and, at times, even the principal amount.

Here's how you can reduce your risks in corporate FDs and choose from the various options available:
Default Risk :
Company deposits are typically unsecured, which means that you cannot lay your hands on the assets of the company if the company defaults. In that event, your turn to receive your money will come only after the secure lenders of the company are repaid. Thus, choose a company with a good rating.
Sorting through the maze :
You must know how to select the right Fixed Deposit and how to avoid the not-so good ones. Here’s how you do it :
Firstly, start by looking at the Credit Rating of the deposit. Settle for a company which has more than a double-A rating. This process will automatically weed out companies with high financial risks.
Authenticate the nature of the company's business and whether it is a profit-making company, if the company offers 1.5% to 2% points more than a top-rated company on deposits. Remember, Higher Returns come at the cost of assuming Higher Risks.
Prefer Listed Entities to unlisted ones, unless the latter are government-backed. Listed entities provide information of their business and financial information to the exchanges. This makes access to information easy and thus you may decide which companies to avoid.
Do remember to read the Fine Print in the application form. Look for changes or alterations in the terms and conditions relating to issues such as premature withdrawal both for new applications and renewals.
Companies where you should not invest :

Deposits thus mobilized are governed by the Companies Act under Section 58A. These deposits are unsecured, i.e., if the company defaults, the investor cannot sell the documents to recover his capital, thus making them a risky investment option.
Companies that offer more than 15% of interest.
Companies that are not paying dividends regularly to the shareholders.
Companies whose Balance Sheet shows losses.
Companies that are below investment grade (A) or less rating.
Does this all mean that you should simply stay clear of these instruments? Not necessarily. If you can do your homework on the company and spread the money across a few deposits, corporate FDs will pep up your debt returns.
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