Company Deposits

Company Deposits are fixed deposits offered by companies. These investment options can earn an investor a fixed rate of return over a selected timeline. Company deposits come with the advantage of plain simplicity, as these are easy to understand and track for new investors.

Here, we will explore the concept of company deposits along with some of the top-rated company deposit schemes for 2021.

What is a company deposit?

Company deposit (corporate FD) is a term deposit held over a fixed period, offering fixed interest rates to investors. Company deposits are offered by Financial and Non-Banking financial companies (NBFCs). The maturities can range from a few months to a few years, depending on the company’s decisions.

Company deposits are an alternate investment option for investors looking for fixed returns. In comparison to bank fixed deposits, company deposits provide higher returns depending on the tenure selected.

Company deposits are unsecured and therefore, they don’t have any deposit insurance, unlike Bank FDs where a maximum investment of Rs. 5 lakhs is secured. Apart from considering the overall health of the financial company or NBFC, one must also consider the risk-reward offering to ensure minimum risk and appropriate returns from the investment.

Top company deposit rates 2021

Here are some of the top company deposits as per interest rates offered in 2021:

Name of the company deposit	Interest Rate (in %)	Tenure
Muthoot Capital FD	7.75% – 8%	1 – 5 years
Shriram Transport Finance FD	7.01% – 7.95%	12 – 60 months
Kerala Transport Development Finance Corporation FD	5.75% – 6%	1 – 5 years
Mahindra Finance FD Scheme	5.7% – 6.45%	12 to 60 months
Sundaram Finance Company FD	5.72% – 6.22%	12 to 36 months
LIC Housing Finance FD	5.25% – 5.75%	1 – 5 years
Bajaj Finserv FD	5.65% – 6.5%	12 to 60 months
HDFC Ltd. FD	5.7% – 6.55%	12 to 84 months
PNB Housing FD	5.9% – 6.7%	12 to 120 months
ICICI Home Finance FD	5.7% – 6.65%	12 to 120 months

Who should invest in company deposits?

Investors who want to achieve short-term investment goals and want to take on low-risk investment options can invest in company deposits. Companies offer higher interest rates as compared to the average bank FD interest rates. This allows investors to fetch better returns from the investment. However, company FDs do not form part of the DICGC (deposit insurance of up to Rs. 5 lakhs) as only bank FDs are covered in it. While this may concern some, investors can check the company’s credit health before investing in it.

The credit health of these non-banking financial companies (NBFCs) is usually determined by the credit-rating agencies across the country like CRISIL, ICRA and CARE. Before investing, investors should ensure an average “Stable” rating for the company. If it’s below average, one must reconsider the investment.

How to choose the right company deposit?

There are many good investment options available in company deposits. If one knows how to select the right company deposit, it can be an interesting investment option within one’s portfolio. To select the right company deposits, here are some of the pointers that investors can follow:

• Investors must avoid any unrated company deposits and ensure to choose a company deposit that has a rating of AA or higher.
• Choose a company with a better reputation within an advisable rating grade. Business newspapers and magazines periodically carry such ratings, and it is not difficult for an investor to check the company credentials before investing.
• Taking help from a qualified financial advisor can also help in selecting the right company deposit.
• While creating a portfolio, spreading company deposit investments over a large number of companies across different industries can be a safer choice. This can help in diversifying overall risk. No matter the rating and reputation of the company, an investor must avoid investing the entire amount in a single company deposit scheme.
• It is also essential to check on the servicing quality and standard of the company before investing in a company deposit.

Every investment has certain unique features and benefits. Thus, investors with specific risk-taking abilities and personal goals must make the investment selection after careful consideration. Evaluating an investment plan and ensuring that it is completely in sync with a personal financial plan is of utmost importance. 

How to invest in Company Deposits

To invest in company deposits, an investor can either:

1. Directly invest through the company’s website or
2. Invest through an online investment platform or
3. Brokers

Some of the steps of investment in company deposits can be carried out online while some may have to be done offline, like receiving a physical copy of the deposit certificate. 

Conclusion

After investing in a company deposit, one must constantly track the investment and the company’s credit rating. As we sail through uncertain economic times, downgrades could be rampant. Therefore, checking the company’s rating along with its fundamentals, such as balance sheet for profitability, reserves, loans, etc is very important. You should weigh the other available alternative investment options like bank deposits, debt funds vis-à-vis company deposits before making an investment choice.

FAQs

1. What are the benefits of investing in company deposits?

Some of the benefits that an investor can avail from company deposit investment are periodic interest payouts, liquidity, additional income through higher rates, no significant impact from market fluctuations, etc.

2. How to invest in company deposits?

One can invest in company deposits either through a broker or by directly approaching the company. In both the options, it is mandatory to undergo the KYC process while making an investment.

3. What is the investment duration of company deposits?

The minimum tenure for a company deposit is usually 12 months or one year.

4. Are company deposits risk free?

Company deposits do not come with a guarantee of capital safety. Therefore, an investor must consider the company’s credit rating before making an investment in company deposits.

5. Which is better, FD or company deposit?

Bank FDs offer fixed returns and are generally risk free. Company deposits, however, are dependent on the company’s credit standing. Therefore, bank FDs are best suited for investors who do not want to take any risk, while company deposits involve some degree of capital risk.