Company Deposits
Companies that offer deposit schemes to consumers tend to offer rates that are in-between bank deposit rates and bank lending rates. This is a win-win situation for the company and the person saving.
The bank has to make a profit when borrowing from the public and lending to companies. So they have an interest rate difference (spread) of about 4.5%. In effect, the deposit holders are paid less and the borrowers are charged more. When a company has direct access to the depositor, both benefit. The depositor gets a better rate than what the bank can offer and the company is able to borrow at a lesser rate when compared to a bank interest rate.
However, it is in the best interest of the borrower to do his reasearch thoroughly and double check how good the credit rating of the company is before investing. On an average estimates show that one can easily get 11% - 12% on reputed companies’ deposits for a 3 year term.
The returns will be taxed as interest and will have TDS.
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