Among the wide range of investment options available for investors today, Company Fixed Deposits are gaining popularity because of the high returns and other benefits. They are considered far more lucrative than Bank Deposits. However, the slate here is not clean, and Company FDs do have their set of risks involved, which need to be analyzed with utmost caution before investment.
LACK OF SECURITY
Bank FDs are more traditional and thus are a safer option. They provide security upto one lakh investment value, while on the other hand there is a major risk involved if the company you invested in suddenly goes bankrupt!
DIFFERENTIAL REGULATIONS
In case of bank deposits, they are governed by the Banking Regulation Act, 1949, while company deposits fall under the Companies Act, 1956, according to which, equity holders are given preference before FD holders, in case the company is shutting down.
PRE-MATURE CLOSURE OF DEPOSITS
Premature closure before 6 months is denied in most corporate FDs, and the investors have a penalty scare over their head. This premature closure in company FDs also requires a trail of tiresome paperwork, which proves to be another big hassle.
REPUTATION
Not only should the interest rates be looked at and be lured by, investors should also track the records of the company they are investing in.
No matter how lucrative company FDs may seem, they are a risk in the investment business, and should be approached with proper aid and advice as well as knowledge backed planning.
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