What are Company Fixed Deposits?

A good majority of the population is not aware of the option of fixed deposits existing outside the banking sphere. This lack of awareness may lead to our own financial losses due to lost opportunity and wrong investments, since investing in company fixed deposits is a great way to earn higher Returns on Investment (ROI) compared to investing in normal bank fixed deposits. Investors can put their funds in a company fixed deposit scheme offered by various sources such as manufacturing companies, financial institutions, NBFCs, etc., and get a fixed rate of returns in the form of interest over a stipulated period of time.

Company fixed deposits is an attractive option for investment since it is relatively safe compared to investing in stocks and shares although slightly riskier than a normal bank deposit, and offers incomparable interest rates on a short term basis. The minimum lock-in period is just six months. There are income tax benefits as well - Income Tax is not deducted at source if the interest on  income is up to Rs 5,000 only in the given financial year.

Company fixed deposits are an attractive investment choice since it offers more returns than bank fixed deposit schemes, but care has to be taken while choosing the company where you want to deposit in order to minimize risks involved. 

Before investing in a company fixed deposit watch out for red signs such as low credit rating by credit rating agencies such as Crisil, India Ratings, CARE etc., on a rating scale that shows risk and safety. Do not go by the attractive offers from companies, rather go by their safety ratings since companies try to hide their flaws with marketing gizmos. 

Do a thorough research on the company background, including their payout records, the fund liquidity and lock-in period, interest payment frequency, etc., and make an informed decision on company fixed deposit investment options.

RBI to revolutionize Banking in India

RBI is set to bring in revolutionary changes in banking with it's final guidelines for issuing licences for payment banks and small finance banks. The present oligopolistic banking structure has benefited private sectors banks, with no show of competition offered by public sector banks.  Technological innovations in banking , implemented through online banking, net banking, ATM banking, Social Network banking etc has already wowed customers but this actually is a blindfold that prevents the customers from focusing on the mediocre customer service and assistance provided by the Banks and the high charges levied.

RBI's new policies would indeed throw a spanner in the works for private banks since it would threaten this market power play that they had been enjoying so far with small finance banks entering the scene. RBI is observed to have become more liberal in issuing licenses to genuine Non-Banking Finance Companies (NBFCs) and Micro Finance Institutions (MFIs), as well as mobile companies and so on (E.g : Airtel Money, Paytm, Digital Wallets). Small finance banks would have to lend 75 percent of their loan portfolio to priority sectors such as agriculture and small businesses and a huge percent of the loans should not exceed Rs 25 lakh.

RBI guidelines state that mobile companies, retail chains, NBFCs, public and private sector companies, etc. can set up payment banks. They just need Rs 100 crore of capital and can offer savings or fixed deposits up to a maximum of Rs 1 lakh. These guidelines for payment and small finance banks will open up the banking sector to the economy's real potential, make banking more customer friendly, encourage financial inclusion, as well as bring down margins.