Fixed Deposit:- FAQ’s

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What is the difference between Cumulative Deposits and Non- Cumulative deposits?

In a Cumulative Deposits Scheme, interest is payable at the time of maturity along with the principal. This Scheme is suitable for the people who do not require periodic interest payment. This is also called  Money Multiplier Scheme. In a Non-Cumulative Deposit Scheme interest is paid on periodical basis.

What is the minimum tenure for a fixed deposit?

6 Months.

Do I get the facility of crediting my interest earned to another account when I place a fixed deposit?

Yes, you get to choose between placing a cumulative or non-cumulative deposit at the time of account opening. In a non-cumulative deposit, the interest earned will be paid on a periodical basis whereas in a cumulative deposit the interest earned will be ploughed back with the principal deposit amount.

What is compounding in FD?

In case of deposit with Cumulative option, interest accrued is added to the existing deposit amount at the end of every year on 31st March. Cumulative scheme of FD is compounded annually.

Who can buy an FD?

Following entities can buy an FD: Any individual who comes under definition of ''Person of Indian Origin' as defined by the Government of India/Reserve Bank of India, from time to time. Any Non - Resident Indian Non-individual resident legal entities like Hindu Undivided Family, Trust, Association of Persons, Societies, Firms, Companies, etc.

Will my deposit get automatically renewed?

No. The Customer will be asked for renewal on Maturity of Deposit.

What is Company Fixed Deposit?

Company Fixed Deposit is the deposit placed by investors with companies for a fixed term carrying a prescribed rate of interest for prescribed time period.

How is interest payments made?

Interest is paid on monthly/quarterly/half yearly/yearly or on maturity basis and is sent either through cheque or ECS facility.

When is TDS deducted on the interest from Company Fixed Deposits?

TDS is deducted if the interest on fixed deposit exceeds Rs.5000/- in a financial year.

Is there any scope of appreciation of principal?

At the end of deposit period principal plus interest is returned to the deposit holder.

How to choose a good company deposit scheme?

Ignore the unrated Company Deposit Schemes. Ignore deposit schemes of little known manufacturing companies. For NBFC s, RBI has made it mandatory to have an A rating to be eligible to accept public deposits, one should go further and look at only AA or AAA schemes. Within a given rating grade, choose the company with a better reputation. Once you decide on a company, next choose the schemes that have given a better return. Unless you need income regularly, you should prefer cumulative to regular income option since the interest earned automatically gets reinvested at the same coupon rate giving upon better yields. It also gives you a lump-sum amount at one go. It is better to make shorter deposit of around 1 year to 3 years. This way you not only can keep a watch on the company s rating and servicing but can also plan to have your money back in case of emergency. Check on the servicing standards of the company. You should not oblige companies that care little about investor services like promptly sending interest warrants or the principal cheque.

Which companies can accept Deposit?

Companies registered under Companies Act 1956, such as: Manufacturing Companies. Non-Banking Finance Companies. Housing Finance Companies. Financial Institutions. Government Companies.

Upto what limits can a company accept deposit?

A Non-Banking Non-Finance Company (Manufacturing Company) can accept deposit subject to following limits: Upto 10% of aggregate of paid-up share capital and free reserves if the deposits are from shareholders or guaranteed by directors. Otherwise upto 25% of aggregate of paid-up share capital and free reserves. A Non-Banking Finance Company can accept deposits upto following limits: Equipment Leasing Company can accept four times of its net owned fund. Loan or Investment Company can accept deposit upto one and half time of its net owned funds.