What are the Do's and Don'ts of investing in Company Fixed deposits
Check On Credit Ratings : A very important indicator. It highlights the underlying risk of the company. AAA rating denotes the highest safety. It indicates the financial health of the company and the ability to service its financial obligations. In simple words, AAA rating indicates that you can trust a particularly rated company with your money and expect it to pay the interest amount due to you. CRISIL and ICRA are India's leading credit rating and research institutes. They do a detailed research of the company and then rate them.
Check on promoter Credibility : Promoters play a substantial role in making or breaking a company. So always do a background check on them. Promoters with dubious or shaky records should be strictly avoided. Doing a background check on promoters is easier said than done so the safer route is to invest in fixed deposits of a blue-chip company.
Get lured by High interest rates : Any company offering a very high rate of interest should be a cause for concern. Companies generally offer high rate of interest to make up for the perceived risk attached with their offerings. So again don't get carried away with high rate of interest as they always come with high risk. The major risk in case of a company FD is that if the company is unable to repay your money, you end up losing it. But in case of banks, the rules are stricter and your money is safe as the bank FDs are insured up to Rs. 1 lakh.
Don't forget to check on past performance : Although past performances are generally not considered a very good indicator of the future of a company, one should not completely avoid it. Any investor must check the past payment history of the company. He should also check the investor service standards of the company.
Don't hesitate with regulator assistance : There are regulators to keep a check on any frauds or mishandling of public money by companies or mutual funds or exchanges. So in case your company defaults; check who the regulator is and lodge a complaint with them. For listed companies you can file your complaint with the Securities and Exchange Board of India. For manufacturing companies it is Department of Company Affairs. For banks and non-banking financial companies it is the Reserve Bank of India.