What are the advantages of investing in a bond vis-à-vis placing a deposit?

Mehak Chadha, Ludhiana

Bonds are generally tradable and provide a quick and easy premature exit opportunity to its holder. And if they are traded in sufficient volumes, there might also be a fair exit price. Deposits are to be held to maturity. Premature withdrawals invite penalties and also lower interest rate with retrospective effect. But then things are not hunky dory in the bonds market in India, given the thin volumes and the near dormant trading resulting in distress sales.

Appointment of auditors

Why is there a difference in the matter of appointment of auditors of public sector and private sector companies?

Surabhi Deshmukh, Nasik

The auditors of public sector companies are appointed on a rotational basis by the Comptroller and Auditor General of India whereas those of private sector companies are appointed by shareholders annually. Effectively, the auditors of private sector companies are handpicked by the management and thus the independence of the auditors is lost considerably. It is common knowledge that the reports of the auditors of the public sector companies are more scathing and meaningful as against the laconic reports by their private sector counterparts. I would like the auditors of listed private sector companies at least to be appointed by the Securities and Exchange Board of India from out of a panel of auditors registered with it on a rotational basis, in the interest of independence of the auditors.

Advantages of CP

Why is commercial paper superior to working capital loan from banks?

T.R. Jayaraman, Chennai

The Reserve Bank of India allows well managed Indian companies meeting certain accounting parameters to raise money through issue of commercial papers. By issuing commercial papers, these companies wrest the initiative from banks. In other words, these companies dictate terms and banks have to willy-nilly subscribe to these papers attracted by the better than Treasury bill returns.

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(This article was published on June 26, 2011)
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