The stock market volatility has led many investors away from equities in deposits. While bank deposits has been a perpetual favorite, are liable to corporate income tax deposits to attract more investors who are attracted by higher yields and greater choice. But not to guarantee a fixed return are not the framework decisions undertaken without risk.

If companies are economically insecure, they may also be able to pay interest and loans, sometimes even equity. In 1990, many investors lost their hard earned savings, because they attract high-yield and not try to understand how a company generates cash to pay for deposits.

Here's how you can reduce your business risks in the DF and choose among the many possibilities available. Also choose some investment options that offer some performance with limited risk.

The risk of default

If you think of the framework decisions of the company are as safe as your bank deposits, here's the bad news: While bank deposits to your savings account balances of each bank are insured up to Rs 1 lakh, decisions of non-executive.

These deposits are generally unsecured, which means that you can not give access to the company's assets, if it comes down to financial difficulties and was liquidated. In this case, your turn to get the money will be safe as long as the company's creditors have been repaid. In a bank deposit, your money for more diligent than banks regulated by RBI. Banks use the money to give to customers to assess their creditworthiness. Companies, on the other hand, spend money for their projects, or, sometimes, their working capital. The risk profile of these projects can be high. The banking system also provides the liquidity to pay a deposit if you withdraw it before maturity. We can at best be a small penalty.

Not all companies are cash rich. Short-term cash that can be a challenge. In the past, many companies, even large hotels India as a warning made in their application forms that premature withdrawal would be at the sole discretion of the company. All the fine print.

TRI in the maze

All this means that you should just stay away from these tools? Not necessarily. If you do your homework, and the company's money to spread around to a couple of stores in the near future, companies will increase your tax debt, especially when interest rates are so high as they are now. In this way of proceeding.

Credit: Start by looking at the credit of the deposit you are studying. RBI requires non-bank financial companies such as HDFC and Dewan Housing Finance to get their deposit instruments evaluated. This will be an important part of your application. HDFC, for instance, has a triple A (AAA shown) Rating Crisil, the top rating awarded to an investment vehicle quality. Ansal Properties & Infrastructure, on the other side has a Fitch Rating of B-(long-term debt), reflecting speculative grade and low margin of safety.

Looking for a triple-A rated company and not settle for anything less than a double-side. This process will automatically remove financial firms and high-risk business.

Non-financial companies are not regulated by the RBI. Many of them, while getting a note of their instruments in the long term or short term, not specifically given their fixed deposit valued. So credit is often not available for an applicant future. The filing of Jaiprakash Associates is one example. You have two ways around this limitation. If the company is a leading, an Internet search of its rating systems build results. Crisil, ICRA, CARE and Fitch are organizations that do most of the notes. You can view their websites as well. Otherwise, take a closer look at the finances of the company, which will be disclosed in the application form.

Finance: For non-financial corporations, look at the balance sheet debt - loans secured and unsecured. If this sum is more than twice the net worth (capital and reserves and surplus) you may be right to be cautious. Another additional checks if you have access to the return of the company, is to check the annual interest costs. Looking for earnings before interest and taxes covering interest charges at least twice. Low coverage, the more excited the company is to maintain your interest.

High rates: If the submission of tenders 1.5 to 2 percentage points more than the most popular company to verify the nature of the company and whether it is a nonprofit entity. Jaiprakash associated deposits' will bear interest of 2.5 percentage points higher than the platinum deposit HDFC. Remember, increased profitability at the expense of taking greater risks.

Entities listed: Prefer to entities listed not listed unless they are supported by the government as HUDCO. Listed entities to make a good part of its business and financial information to trade. This makes it easier to access to information. While you can explore non-listed companies, but the public, such as Sundaram BNP Paribas Home Finance, prevent the partnership or limited liability companies. These are the least regulated and disclose soon.

Check the story: You can also take into consideration in assessing whether the company has a colorful history of periods of time. This is a site sponsored by the Investor Education and Protection Fund, Ministry of Corporate Affairs.

In general, it is best to refrain from unfamiliar names, even if the agent can recommend. Remember, agents are paid a commission to promote these important IFD.

By studying the history of the company, always check with your agent and other applicants on how the company offers the FD immediate receipt or payment of interest.

Many companies today is between 45 and 60 days to issue a receipt if you are not in the same city as the division of treatment of the company. How to delay talking about poor service.

Fine print: always read the fine print on the application form. Many of the terms and conditions relating to issues such as early retirement are buried on the second page of the application form. If the deposit is renewed, look for any change in terms from the time you submitted.

Once you've put your finger on your investment, be sure to avoid locking in the FD business over three years. The future of a business is difficult to predict beyond that, and no deterioration in business or financial loss usually start a business in a 2 to 3 years.

Investment decisions:

Based on the above checklist, here are a couple of near future, can provide good returns for investors with different risk appetite. Bill HDFC Platinum deposit is a good return with limited risk (see the table of interest rates).

Dewan Housing Finance, Shriram Transport Finance Company and deposit services Unnati and Mahindra & Mahindra Financial, all offer a slightly higher performance with a higher risk than platinum HDFC.

However, they benefit from the quality rating. Even if you are an investor in high-risk, it may be best to stay away from deposits of infrastructure and property in the current scenario, as they have yet to fully recover from the 2008-recession. You may be better to take risks in shares, which at least can be sold.

For risk averse wants to diversify from their deposits Poste, Exim Bank of India and SIDBI Hudco are good options.

Source: thehindubussinessline