Company Deposits : Many companies, large and small, solicit fixed deposits from the public. Fixed deposits mobilized by manufacturing companies are regulated by the Company Law Board and fixed deposits mobilized by finance company (more precisely non-banking finance companies) are regulated by the Reserve Bank of India. The key features of company deposits in India are as follows:
- For a manufacturing company the term of deposits can be one to three years, whereas for a non-banking finance company it can very between 25 months to five years.
- A manufacturing company can mobilize, by way of fixed deposits, an amount equal to 25 percent of its net worth from the public and an additional amount equal to 10 percent of its worth from its shareholders. A non-banking finance company, however, can mobilize a higher amount.
- The interest rates on company deposits are higher than those on bank fixed deposits, but so is risk.
- Company deposits have to be necessarily credit-rated.
- Depositors don’t get any tax benefit on company deposits. However no income tax is deducted at source if the interest income is upto Rs. 5,000 in a financial year.
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