You can make a deposit with a Company in a similar way to a bank fixed deposit. The Company pays a slightly higher rate of interest on deposits made with them, than a bank fixed deposit for a fixed time period.
However, these deposits are unsecured.
Therefore, if the company defaults, the investor cannot sell the company to recover his/her capital.
On the other hand, corporate FD’s apart from giving a superior interest rate than banks, also provide investors with a short-term deposit option with shorter lock in period as well as the benefit of having no income tax deducted at source if the interest income is up to certain amount in one financial year.
Categories: EARNING FROM CORPORATE DEPOSITS