Corporate fixed deposits are similar to banking FD’s, except that the money invested is with a company and not a bank. Desposits under corporate FD’s are governed by the Companies Act under Section 58A.However, these deposits are unsecured, On the other hand, corpanies FD’s apart from giving a superior interest rate than banks, also provide investors with a short-term deposits option with only a six monthlock in period as well as the beefit of havimg no income text deducted at source if the interest income is up to Rs 5,000 in one financial year. Investments can also be spread in more than one company, so that interest from one company does not exceed Rs 5,000.
Corporate FD’ s however do not chang their rates during a six month to one year period, which provides stability to the imvestment, These deposite, while are not very large from a big company’s point of viwe end up running more on a constant addition and exclusion of investors. The interest paid by the companies is usually on a half yearly basis. Majority of the companies who raise money via fixed deposits have quarterly interest payouts and the imterest vary from 9-13% based on the option one choose. With such large fixed deposit issues available in the market, mutal funds may lose out in investors who invest in their fixedincome products, and give to competition withhin the fixed income market space.