Fixed Deposits are the safest way to invest your money in a plan that eventually grows your amount. Considering the long-term benefits of fixed deposits, every bank and even corporates are now offering this service.
Basically, Fixed Deposits offer higher rates of interest on savings as compared to conventional savings accounts. However, the plans offered by banks generally have a very long tenure. So, Corporates and NBFCs took advantage of this factor and started offering fixed deposit schemes but the ones that are meant for the short-term and offer high interest rates.
What are Corporate Fixed Deposits?
Corporate fixed deposits or company deposits are the types of deposits in which you save your money in a deposit plan for a fixed period of time. These deposits are offered by private institutions, generally non-banking financial institutions.
The best corporate Fixed Deposit rates include the following:
| Name | Fixed Deposit Interest Rate (%) |
|---|---|
| Bajaj Finance FD | 7.00% -7.40% |
| Shriram Finance FD | 7.11-8.6% |
Features of a Corporate FD
The features of a corporate fixed deposit are:
- They are low to medium-risk instruments of investment.
- These FDs are not affected by market fluctuations.
- You can easily liquidate these FDs.
- They are like normal bank fixed deposits but have a higher rate of interest.
- Some also offer the facility of premature withdrawal without any restriction.
Corporate FD vs. Bank FD
The main differences between a Bank Fixed Deposit and Corporate Fixed Deposits are:
| Feature | Bank Fixed Deposits (FD) | Corporate Fixed Deposits (CFD) |
|---|---|---|
| Issuer | Banks and financial institutions | Non-banking companies and corporations |
| Interest Rates | Generally lower compared to corporate FDs | Often offers higher interest rates, providing a potential premium on returns |
| Risk and Safety | Generally considered safer due to regulatory oversight and government insurance (up to a certain limit) | Higher risk due to the absence of government insurance; dependent on the financial health of the issuing company |
| Credit Ratings | Not applicable; banks are assessed through other parameters | Issuers are rated by credit rating agencies, providing insight into their creditworthiness |
| Liquidity | More liquid, with options for premature withdrawal without substantial penalties | May have restrictions on premature withdrawals, and penalties could be higher; less liquid compared to bank FDs |
| Tenure Options | Offers various tenure options, including short-term and long-term | Provides flexibility in choosing tenure, aligning with investor preferences |
| Tax Implications | Interest income is subject to tax, with TDS deductions | Similar tax implications, with the option to submit Form 15G/H to avoid TDS |
| Regulatory Oversight | Governed by the Reserve Bank of India (RBI) and other regulatory bodies | Subject to regulatory oversight but lacks the extensive banking regulations applied to traditional banks |
| Purpose of Investment | Suited for conservative investors looking for capital preservation and lower risk | Attracts investors seeking potentially higher returns willing to accept slightly a higher level of risk |
| Flexibility in Interest Payments | Interest paid monthly, quarterly, half-yearly, or annually | Provides options for different interest payment frequencies, aligning with investor cash flow needs |
| Diversification | May not contribute much to portfolio diversification | Enhances portfolio diversification by introducing a different asset class |
| Senior Citizen Schemes | Banks often have special schemes for senior citizens with preferential interest rates | Corporates may also offer special schemes for seniors, but not as prevalent as in banks |
| Public Perception | Generally perceived as a safe and secure investment option | Perception varies; depends on the reputation and credit rating of the issuing corporation |
Benefits of Investing in Corporate Fixed Deposits
There are significant advantages to investing in Corporate Fixed Deposits. These advantages are
Premature Withdrawal
You may withdraw your Corporate Fixed Deposit as and when required. While this feature varies from company to company, the facility of premature withdrawals makes corporate fixed deposits much more flexible and reliable to plan to invest in the short term.
Interest Rates
The highest FD rates are offered by corporate FDs compared to those of banks. The rate of interest for most of the corporate FDs ranges from 8% to 9%. Some corporations even provide a higher rate of interest to senior citizens. Higher interest rates make corporate FDs a more preferred option for those who have higher return expectations.
Payment of Interest
As an investor in corporate FD, you can choose the interest payment duration, which can be monthly, half-yearly, quarterly, or yearly, as well as cumulatively. This aspect offers an additional source of income to the investors.
Credit Ratings
The credit ratings given to corporate FDs are provided by recognized rating agencies like ICRA, CRISIL, and CARE. These agencies check the creditworthiness of corporations and give ratings accordingly. On the other hand, there are no credit ratings in the case of FDs offered by banks.
Actionable Adverbs
Fixed Deposit schemes offered by corporate agencies offer more reliable solutions for short-term investment plans and a much easier and more accessible way to earn a higher rate of interest on your investments. Therefore, selecting where and how to invest your money is a careful and important decision that should always be considered twice before coming to a final opinion.
At GoldenPi, we make your investment in corporate FDs a piece of cake. All you need to do is follow a three-step process:
- Sign up on GoldenPi and complete KYC.
- Select the CFD.
- Confirm the investment and enjoy the benefits.
You can invest as little as ₹5000 in corporate FDs and earn an interest rate of up to 9.20% p.a!
FAQs about Corporate Fixed Deposits
Q1. How is Corporate Fixed Deposit different from traditional Bank Fixed Deposits?
Corporate Fixed Deposits are usually meant for short-term investments that offer higher rates of interest. Traditional FDs offer long-term investment plans with comparatively lower rates of interest.
Q2: Which Companies offer Corporate Fixed Deposits?
Shriram Finance, Bajaj Finserv, Mahindra Finance, LIC Housing Finance & PNB Housing Finance are among the premium companies that offer Corporate Fixed Deposits.
Q3: Is it Safe to Invest in Corporate FDs?
It is completely safe to invest in corporate fixed deposits offered by reputed companies.
Q4. Is there any Regulatory Authority that Monitors Corporate Fixed Deposits?
Bank FDs are monitored and regulated by the Reserve Bank of India (RBI). Corporate FDs are issued by NBFCs and HFCs and are regulated by the Reserve Bank of India (RBI) and the National Housing Bank (NHB).
Q5. Can Non-Residents of India (NRI’s) Invest in Corporate Fixed Deposits?
Yes, Non-Residents of India (NRIs) can invest in Corporate Fixed Deposits through an NRO account. The maximum tenure of their deposits can be 3 years.
Q6. Can I earn by Investing in Corporate Fixed Deposits?
Yes, interest earned on corporate fixed deposits can be a source of income for the depositor. This interest can be credited annually, monthly, or as per the depositor’s needs and preferences.
Q7. What is the minimum amount that can be invested in Corporate Fixed Deposits?
The minimum amount can vary from company to company issuing corporate FD. Usually, the minimum can be Rs 5,000, and the maximum may have no upper limit.
Q8. Can I withdraw Corporate Fixed Deposits before maturity?
Yes, Corporate FDs can be withdrawn before the maturity date. However, this facility comes with conditions and penalties, as imposed by the issuing body. Some companies will have a lock-in period during which it can’t be withdrawn. Others may impose a penalty, and some may reduce the interest rate based on the tenure for which it was held.
