Fixed deposits are normally unsecured loans issued by corporates, banks ,financial institutions and others.
The companies to fund their short term requirements or other financial requirements borrows from the general public and provides a better rate than the banks.
The company enters into a contract with the depositor, wherein the company has an obligation to pay the interest payment & principal at a pre-determined time & at a pre- specified rate.
The main difference between a fixed deposit and a bond is, the bonds are transferable instruments whereas fixed deposits are non transferable. Hence apart from interest earnings fixed deposits cannot offer capital appreciation as the same can be surrendered only to the issuer before its maturity.
In case of a premature withdrawal by the depositor, the depositor gets his capital back at a 1% lesser rate than the contracted rate. The premature withdrawal is only possible after a minimum holding of six months. The company fixed deposits in India are governed by the company law board and the Reserve Bank of India