company fixed deposits are unsecured debt instruments Whereas  FD with Bank is insured upto Rs 1 lakh.Deposit Insurance and Credit Guarantee Corporation of India guarantees repayment of Rs 1 lakh in case a bank defaults. Companies offering this product offer no such guarantee and the safety of your deposit depends much on the financial health of the company.

While the health of bank is generally okay in India , thanks to constant effort of RBI, the health of a company  and its offering of FD can be judged from Credit Ratings assigned by two of India’s leading credit agencies-ICRA & CRISIL .You must give attention to the ratings as provided by CRISIL and ICRA. The higher the rating, higher is the safety. Any company’s fixed deposits assigned ratings below LAA/MAA or FAA (that is FBBB or below) should be avoided at best.

Don’t be greedy about rate of return !

While the FD ofered by companies are greater than Banks and that is one of the reason , people going for FD with companies, however one should be wary of  any company offering a very high rate of interest as it should be a cause for concern beaus that high interest is just to cash in the usual greed of human being and fr stopping peopl to take a rationale decision.Therefore , if banks are offering 9 % cumulative interest,then avoid investing in any company’s fixed deposits that offer rate of interest higher than 12 cumulative interest.

Keep tracking the company:

The FD with the bank certainly gives you peace of mind..When you invest in FD of company , you can not afford to just forget  about the company till the maturity of the FD. This is often the case of FD with Bank. You must always keep an eye for any bad news which will fundamentally effect the company. If you feel the company will be affected very negatively , get your money back immediately.