5 Things to look for in a company Fixed Deposit

Company Fixed Deposits (FDs) may offer a higher rate of return than normal bank deposits. As a part of diversification of your portfolio, it is advisable to invest in company FDs. But you have to be look for a few important things before you invest

Here are 5 things that you must look for before you pick a company FD:

• Credit rating: A rating is assigned by a rating agency, which looks at the credit worthiness of the company that is accepting the deposit. When you pick a company deposit, do not opt for unrated fixed deposits. The Reserve Bank of India (RBI) has made it mandatory for Non Banking Finance Company (NBFC) deposits to have at least an A rating before they can issue a deposit. You should consider schemes with AAA ratings.
• Background: It is indispensable that you give consideration to a company’s background. You can research the repayment history and the reputation of such established companies and use the guidance of your financial advisor to pick a safe company deposit.
• Liquidity: Company FDs have an element of liquidity in the sense that you can withdraw money after a period of time. The lock-in period can be as low as 3 months. The following penalties apply if you make a premature withdrawal:
  

  Category of Investor	Premature Withdrawal	Interest Payable	Premature Withdrawal	Interest Payable
  Individual Investor	After 3 months but before 6 months	4 per cent	After 6 months but before date of maturity	1 per cent lower than interest on public deposit for period deposit has run.
  Other Investors	After 3 months but before 6 months	None	After 6 months but before date of maturity	1 per cent lower than interest on public deposit for period deposit has run.

• Interest payments: You can choose to receive interest payments monthly, quarterly, half-yearly or annually. Please note that interest rate may vary depending on the frequency of interest payment.
• Facilities: Company fixed deposits offer a host of facilities to depositors. Some of these are:
  Nomination: You can appoint a nominee who will receive the proceeds of your deposit in case of your demise before maturity of the deposit.
  At par encashment: You can receive your interest payments or encash your FDs by receiving an at PAR cheque.
  Loans against FDs: A loan up to 75 per cent of the deposit amount can be taken against your company fixed deposits.

Company fixed deposits are safe if the depositor does his homework and researches diligently with respect to the background and the creditworthiness of the company that is issuing the deposit.

PNB Housing Finance Limited is over 2 decades old deposit taking company. The company derives its parentage from Punjab National bank and is a renowned name in the market.

Company’s fixed deposits are rated FAAA by CRISIL, which is the highest safety rating that the rating agency gives out.

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