Company Fixed Deposits
Corporate fixed deposits are similar to Bank Fixed deposits but are offered by Companies. The interest rates offered can be in range from 9%-12%.It is bound to be more riskier than normal Fixed Deposits offered by Banks.
What are the risks with Company Fixed Deposits?
Unsecured Deposit brings Default Risk: It means at maturity they might not be able to return your maturity amount and default in the payment. Company maybe out of cash or may not have sufficient liquidity to pay back due to business issues or recessionary periods.
Unlike Bank Deposits which are secured by RBI there is a default risk associated here.
How can the risk be reduced?
Company deposit schemes are mandatorily required to be rated by agencies like CARE, CRISIL, ICRA etc. Check the rating of the company – a FD rating of AA can offer you relatively more peace of mind.
Are they Advisable?
Objective of Fixed Deposits is safety of Principal which is at risk here just for the sake of 1-2% higher returns.
When Banks are finding it difficult to recover their dues from companies and have been allowing restructuring of loans worth thousands of crores, as an individual it may be very difficult if the interest or principal or both is not paid