What is Deposits In Companies

Normally Deposits are made with companies. Such deposits can also be made with private parties including deposits with friends, relatives, proprietary concerns as also with partnership firms. From the point of view of safety of the investment, the investment by way of ‘Deposits’ or Loans should be avoided. 

If the deposits are made with proprietary firms as well as with partnership firms, then the investment should only be made with known firms. The investor should invest very small portion of his funds by way of deposits or loans. While making deposit with a friend, or a firm or a relative always obtain a stamped receipt in respect of the amount invested by way of deposit. 

The stamped receipt should, in particulars of the cheque, terms of loan, and details of rate of interest and the details about date of repayment of the loan. Always make deposits by account payee cheque to avoid tax problem.

The deposit with a public limited company is a better mode of investment than by way of deposit or loan. The period of investment generally varies from one year to five years. The interest nowadays is generally between 6% to 10% p.a. depending on the maturity of the deposit. 

The investor gets the option to receive interest either monthly, quarterly, yearly or on cumulative basis. While filling up the form for deposit does mention clearly the mode of interest payment. Many public sector companies are also accepting deposits from the public. 

The investor’s confidence is more on the deposits made with a public sector undertaking. It has been our experience that the Public sector undertakings might be making huge losses but they have had a very good track record of timely payment of interest and principal amount. 

If an investor is interested to make investment by way of deposits, then he should better make investment in 4/5 different companies. The public sector undertakings should be given more weight age in selecting your investment for deposits. A big disadvantage of the investment in the form of deposits is that it cannot be withdrawn prematurely.