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How are Interest Payments made to the Investors in case of a Corporate FD?
Wiki User
∙ 12y ago
The Interest payment is usually made depending upon the Investors choice. They can opt for Monthly or Quarterly or Half-Yearly or Annual Interest Payments. The company will declare upfront the mode of interest payment. It will either be through cheques mailed out the investors address or through ECS into the investors bank account.
Wiki User
∙ 12y ago
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How does the Corporate Fixed Deposit work?
Company's/Corporations can raise capital by means of issuing Fixed Deposits to investors using the Section 58A of the Indian Companies Act. These deposits will be used by the company to fund its expansion, meet its day to day cash requirements etc. This is just like a regular loan that we may take from any financial institution. The company will make periodic Interest Payment (Usually Once a Year) to all the investors in return for the deposit they made with them. At the end of the deposit tenure the company will re-pay the money deposited to all the investors. A point to note here is that, these deposits are unsecured. If the company is unable to perform as expected or starts making losses, the interest payments may be skipped and in the worst case, if the company declares bankruptcy, the whole deposited money may be lost. This is exactly the reason why company fixed deposits offer a higher rate of interest (Usually 2-3% more than Bank FD's) to attract high risk investors who want better returns that what is offered by Banks.
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