An introduction to company deposits

Like a bank fixed deposit, a company fixed deposit is a deposit with a company, typically a non-banking finance company (NBFC) at a fixed rate of return over a fixed tenure. The rate of interest depends on the maturity of the tenure. Company fixed deposits are governed by Section 58A of the Companies Act. Features of company deposits Eligibility: You must be a resident Indian. NRIs can also invest in them in certain cases. Entry age: 18 years or older. Minors can open this deposit, with the natural guardian operating it. Investments: Minimum-Rs 1,000. Maximum-No limit. Interest: Depends on the tenure of the deposit and the issuer. Account-holding categories: (i) Individual (ii) Joint (iii) As specified by the issuer. Nomination: Facility is available. Capital protection The capital in a company fixed deposit is not protected if the company is unable to meet its financial obligations. Inflation protection The company fixed deposit is not inflation-protected. This means that whenever inflation is above the guaranteed interest rate offered by the deposit, the deposit earns no real returns. However, when the interest rate is higher than the inflation rate, the company fixed deposit does manage a positive real

This article was originally published on February 23, 2022.