Watch for credit ratings .
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.
Tax and tenure of FD matters !
It may just happen that the interest rate offered in Company FD may be higher, but if you are in higher bracket of income, the tax outgo will also be higher. Secondly, money for more than 3 years is a risy proposition in case of private and public limited companies. So , if you want to keep money for more than 5 years ,choose bank only. Also remember these days the there are tax savings FD in bank , by which you can get deduction upto Rs 5 Lakhs . Read Seven Points One Must Know Before Investing In FD for Deduction u/s 80C!
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