Fixed Deposit

Conservative investors are always looking for ways to increase the return on their investment.

They always prefer to invest in safe instrument like bank fixed deposit, it is very important for them to earn extra income from other relative safe instrument like Company Deposit, NCD’s, Bonds.

Company Fixed Deposit is a different instrument that will pay you an extra percentage of your investment. They offer a up to 2% greater as bank deposits.

Before investing in this company, you must consider the following aspects These are :

  • Is it safe to invest in this company?
  • Is it Good rated company?
  • My principal is safe hand?
  • If they not pay my money, then what happens.

Before Investing in Fixed Deposit check this points

Things to keep in mind prior to investing
  • Do check credit rating assigned by the credit rating agencies to the fixed deposits being considered.
  • Avoid unrated  Fixed Deposit scheme
  • Understand the background and credibility of the promoters.
  • Choose company with a better track record for similar rated companies.
  • Always have a nominee for the deposits made by you
  • Don’t invest the entire savings in in Fixed deposit or single company.
  • Don’t invest in companies that care little about investor services
  • Don’t get lured by high interest rates
  • Don’t hesitate to seek regulators assistance for any grievance
  • Check for financial performance of the company.
  • Low grade company offer higher commission to adviser. Always prefer through good adviser


Credit Rating by agencies such as CRISIL , ICRA, FITCH , CARE evaluate the default risk on these instrument. The rating grades from AAA+ (highly safety) to D (Default). Plus sign is good but Minus sign indicate higher probability to downgrade these instrument.

But is main problem is that these company need not go for a rating for their Fixed deposit. So you can check their balance sheet for last 3 year. If they making profit & paying dividend regularly then they are good.


Instrument with a higher credit risk offer higher interest rate. Avoid Fixed Deposit below the investment grade as they may not offer adequate safety of the principal and interest. Some A+ rated company paying delay interest payment.

In case of companies listed on stock exchanges, you can get yearly and quarterly numbers of these companies on websites of the exchanges. Many companies have raised money using foreign currency convertible bonds in 2007-2008. In some cases the stock prices are lower than their 2007 highs. In these cases, the bondholders are not keen on conversion of their bonds into equity. In such cases, the companies are keen to raise money from all possible sources. If such companies are offering fixed deposits, one has to be doubly careful. If the company could not raise enough money, there may be a default on FCCB redemption which can set the company in a tailspin. Being unsecured borrowing, the interests of the fixed deposit holders may be compromised.

“If the promoter shares are pledged, investors need to be doubly cautious,”  Information pertaining to this is readily available on the websites of stock exchanges in case of listed companies.

A beginner in this field may be lost in the numbers game. Hence it is better to stick with companies that are accepting fixed deposits for a long period of time. A long track record surely offers some comfort..

Check company background

It is better to stick to companies that are promoted by large industrial houses. Though this does not give any guarantee that your money with interest will reach you on due date, it reduces the risk. Large companies with a good promoter and long operating history generally offer low rates compared to new companies with not much operating history.

But it is better to settle for a bit lower returns than risking the capital. If you are still keen to go with companies that may not have much of operating history, do check the background of the company and the promoters on the net. If there is a history of defaults, it is better to play safe and avoid such investment options