Investing in Company Fixed Deposits: Evaluating Interest Rates and Risk Factors
Fixed Deposits are considered as one of the safest and most preferred investment options for the risk-averse investor. The fixed deposit schemes offered by banks and other financial institutions have been around for a long time. But, did you know that there is another type of fixed deposit that is offered by companies? Yes, you heard it right. Many companies, both private and public, offer fixed deposit schemes that offer attractive interest rates and a fixed return on investment after the maturity period.
Fixed Deposits offered by companies are similar to the ones offered by banks and other financial institutions. They have a fixed tenure, where the investor deposits a lump sum amount for a fixed period at a fixed rate of interest. At the end of the tenure, the investor gets the lump sum amount along with the interest earned on it. But, before investing in Company Fixed Deposits, it is important to evaluate the fixed deposit interest rates and risk factors associated with it.
Interest Rates on Company Fixed Deposits
One of the primary reasons for investing in Company Fixed Deposits is the interest rate offered by companies. The interest rates offered by companies can be significantly higher than the ones offered by banks and other financial institutions. However, before investing in Company Fixed Deposits, it is essential to compare the interest rates offered by various companies. By doing so, the investor can take a well-informed decision about investing in a particular company’s Fixed Deposit scheme.
For instance, if an investor is planning to invest INR 1 lakh in a Fixed Deposit scheme with a tenure of three years and a company is offering an interest rate of 7.5% per annum, then the total interest earned on the deposit after three years would be INR 23,385. On the other hand, if another company is offering an interest rate of 8.5% per annum, then the total interest earned on the deposit after three years would be INR 26,974. Thus, by comparing the interest rates, an investor can earn a better return on investment.
Risk Factors Associated with Company Fixed Deposits
While investing in Company Fixed Deposits may seem like a lucrative investment option, there are also certain risks associated with it. One of the primary risks associated with investing in Company Fixed Deposits is the risk of default. Unlike banks, companies are not regulated by the Reserve Bank of India (RBI). Therefore, there is a higher risk of a company defaulting on its Fixed Deposit schemes.
Another risk associated with investing in Company Fixed Deposits is the lack of liquidity. Unlike bank Fixed Deposits, where premature withdrawal is possible, it may be difficult to withdraw prematurely from Company Fixed Deposits. Moreover, if an investor wants to withdraw prematurely, the company may charge a penalty fee or an interest rate lower than the promised interest rate.
Evaluating Credit Ratings of Companies
To minimize the risk of default, it is important to evaluate the credit ratings of companies before investing in their Fixed Deposit schemes. Credit ratings are assigned by credit rating agencies such as CRISIL, ICRA, and CARE. These agencies assign ratings based on the financial strength of the company. Thus, companies with higher credit ratings are considered to be safer to invest in.
For instance, if a company has been assigned a rating of AAA by CRISIL, then it means that the company has the highest degree of safety regarding timely payment of interest and principal. On the other hand, if a company has been assigned a rating of BBB by CRISIL, then it means that it has moderate degree of safety regarding timely payment of interest and principal.
Top Companies Offering the Highest Interest Rates on Fixed Deposits
There are several companies that offer the highest interest rates on Fixed Deposits in India. Here is a list of some of the top companies and the interest rates offered by them:
- Mahindra Finance – 7.90% – 8.35%
- Shriram Transport Finance – 7.95% – 8.30%
- Bajaj Finance – 7.60% – 7.85%
- ICICI Home Finance – 7.05% – 7.35%
- LIC Housing Finance – 6.90% – 7.10%
In conclusion, investing in Company Fixed Deposits can be a profitable investment option, provided an investor evaluates the interest rates and risks associated with it. By comparing the interest rates offered by various companies, an investor can earn a better return on investment. At the same time, evaluating the credit ratings of companies can minimize the risk of default. However, it is important to remember that investing in Company Fixed Deposits involves certain risks, and the investor must gauge all the pros and cons of trading in the Indian financial market before making any investment decision.
You have multiple avenues to your PF balance check through the Employees’ Provident Fund Organisation (EPFO). Whether it’s accessing the EPFO portal using your UAN (Universal Account Number), utilizing the UMANG app, or simply sending an SMS from your registered mobile number to the designated number, these options offer convenient ways to stay informed about your PF balance and keep track of your savings effortlessly.
Summary:
Investing in Company Fixed Deposits can be a profitable investment option. Before investing, it is essential to compare the interest rates offered by various companies and evaluate the credit ratings of companies to minimize the risk of default. Investing in Company Fixed Deposits involves certain risks, and the investor must gauge all the pros and cons of trading in the Indian financial market before making any investment decision. Some of the top companies that offer the highest interest rates on Fixed Deposits in India include Mahindra Finance, Shriram Transport Finance, Bajaj Finance, ICICI Home Finance, and LIC Housing Finance.