FD & Bonds

Fixed Deposit or a term deposit is an instrument by which one can deposit his/her savings for a prescribed period of time with an institution. When the period of deposit elapses, the depositor is entitled to the interest on the deposited amount. In some cases, the rate of interest on fixed deposits can be as high as 9.5%!

How to do it you know well, so lets see how different parties view it from their angle.

The Bankers View:
For banks, fixed deposits (or term deposits) represent a loan arrangement. In simple terms, the money deposited through such investments shall earn a said amount as interest, as per the existing norms and guidelines as set by the banking regulatory authority. The rate of interest on your fixed deposit is determined by many factors such as the location of deposit, the duration for which the amount is deposited as also the currency involved for making the deposit.

The Investors Take:
For a typical investor a deposit is a type of guaranteed deposit on which a bank has an obligation to pay a predefined rate of interest for a predefined stipulated period. Non-profit organizations, corporate entities and individuals alike, who wish to keep aside a stipulated sum for a particular period of time, most often than not, find that such deposits are the easiest way in attaining their objective. The icing on the cake is their money will earn a rate of interest that is shielded by any fluctuations in the interest rates that govern other types of investments. Such deposits are a good (if not the best) way to gain a return on investment which is a tad higher than a conventional savings account.

Trust Deposits:

Deposits that are made "in the name of one person, as trustee for another" are branded as "trust deposits."

Trust deposits are made for three basic reasons:

  1.  Pose for the disposition of a domain after demise sans the use of a will or administration,
  2.  Hide from others info of financial standing, or
  3.  Escalate deposits where a prescribed limit is set upon single deposits.

Lastly, fixed deposits offer investors a relatively safe avenue for parking their funds, albeit at the risk of earning a slightly lower return on investment. At the end of the day, it is up-to the individual investor to decide for themselves whether they wish to pursue a high return-high risk approach or a relatively lower but largely safe investment approach.

Types of Companies offering Fixed Deposits

Financial Institutions like Scheduled commercial banks, cooperative banks etc.
Non-Banking Finance Companies (NBFCs).
Manufacturing Companies or Large Conglomerates.
Housing Finance Companies.
Government undertaking Companies.

Features and Benefits

Company Fixed Deposits offer comparatively higher returns than banks.Choose the best tenure for you from a wide range as per your convenience and do check the credibility of the institution offering the deposit.

Company Fixed Deposits are non transferable that means there is no fear of FD receipt being stolen. In case it falls into wrong hands, it cannot be misused. Premature encashment of deposit is available any time subject to payment of prescribed penalty.

Diversify Risk- The deposits should be spread over a large number of companies engaged in different industries. This way, you all be able to diversify your risk among various industries/companies.

Wide Choices- Many companies operating in the Company Deposit market. This will help you decide whether to renew or reshuffle the deposit. Attractive rates as applicable from time to time.


Bonds are just like fixed deposits by nature, but they are not backed by financial guarantee from banks or financial institutions. These are generally offered by corporates and many private or PSU companies, for a certain period and they offer a fixed interest coupon on that. Sometimes companies do not offer coupons; rather they sell bonds at a discount on face value, which translates into some percentage earning.

Apart from these companies bonds are also offered by central and state governments which are backed by sovereign guarantee.

There are broadly two type of bond markets:

  1. Primary Bond Market: Where bonds are offered for the first time and at a face value and fixed coupon is paid by the issuer.
  2. Secondary Bond Market: When bonds are initially issued after that they get listed on exchanges where people can buy and sell them at a price discovered by demand and supply, also by change in rate of central bank.

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