Company Deposits – Caveat Emptor

When inflation is high and interest rates on term deposits and bonds are low, or when fixed income instruments start offering equity like returns during liquidity crunches, company fixed deposits  become  tempting. Here are a couple of things to consider to rein in your greed.

1.No one became a billionaire via company deposits, unless he owned the company taking the deposits, so hold your horses.Company deposits can be tax inefficient, so think twice before sticking your in money here.

2.A company FD is an unsecured debt so if a company is liquidated, FD holders are paid after debenture holders and commercial lenders. By then there might not be enough to pay back the principal, much less interest. Liquidation proceedings take time so even whatever little money might be returned to you will take a while to come. So avoid companies with accumulated losses. Read more of this post