Non-banking financial corporations and construction and housing loan companies raise working capital from individual investors, trusts and other associations as company fixed deposit. They come with fixed term and attractive interest rates.
Before you venture into such investment tools, raise your awareness about the companies receiving the deposit. Vet the company's rating by agencies such as CRISIL and ICRA.
The best deposits are between one year and three years. If the company rating is low, go for short-term deposits.
If you are not keen on frequent interest payments, it is a good idea to opt for cumulative schemes.
Deposits with companies with a good track record is as safe as a bank deposit. If not, you are entering risky territory.
Deposits up to Rs 20,000 is provided with insurance cover. So you can pan out your investment in various companies to reduce risk.
Space out your investment. If you deposit a big amount at one go, you may face problems of liquidity when you are in need of money. If you withdraw before the end of the term, your returns may be lower.
The interest amount is subject to taxes.
You have to check the company's track record, including the date of its inception, the payment of dividends and whether it is listed on a stock exchange.
Do not invest in company's that make losses. Avoid anything below a credit rating of A. Companies that do not pay regular dividend and interest payments are best avoided.
In case you have been denied interest or even your deposit from an NBFC, you can complain to the Reserve Bank of India or the company board. If the company is listed, you can complain to the Securities and Exchange Board of India.