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.
Considering both your short term and long term investment goals, the Coprotae Fixed Deposit is highly profitable compared to regular savings deposits. Get your idle money to take some action.
Key Takeaways
- The interest rate in Corporated Fixed Deposits ranges anywhere from 7% to 9%, a greater deal than savings and bank FDs.
- The financial goals can be met with flexibility in the tenure options, be it short or long-term.
- Agencies like ICRA and CRISIL rate the corporate fixed deposit as a measure for investors to decide on investing based on the creditworthiness of the corporation issuing it.
- The feature of premature withdrawal before maturity is another consideration in staying invested in a goal and the term for this differs from company to company.
- The interest payouts have flexibility at monthly, quarterly, semi-annually and yearly.
- This adds value to portfolio diversification in order to increase the returns from your investments, considering the risk associated with different instruments.
- The instrument has liquidity like other investments in the market, making it easier to sell when needed.
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
Investment
Just like your Bank FDs, the high-rated corporate FDs provide you the repayment of fixed returns with the capital returned at maturity. Although there isn’t any insurance of Rs 5 lakhs in the corporate FDs, their high ratings signify a good record of repaying history.
Flexible Tenure
You don’t have to be invested for long in this investment, pick the tenures that suit your financial objective be it 1, 2, 3, 4 or 5. The span of the corporate FD investments is anywhere between 1 and 5 years and not more than that.
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.
The returns expected here are always on the higher end compared to the regular Bank FDs. Especially there are investment-grade rated corporates who are offering higher returns which can beat the returns offered by the Banks. But are Corporate Fixed Deposits a Safe Investment Choice? The safety largely depends on the company’s credit rating and financial stability, making it essential to assess these factors before committing. There may be a few small finance banks who are offering similar types of returns like Corporate FDs but the risk of investing in them must be checked.
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.
Risks associated with Corporate FDs
With any investment, there is always a risk associated and you must know the risk associated with the corporate FDs as well.
Credit risk
If you invest in low-rated companies, the risk of defaulting on the interest payment can be seen depending on the financial condition of the issuer. Hence it is always recommended to invest in companies that have high credit ratings anywhere between BBB and AAA.
Re-investment risk
Suppose after the maturity period of the previous investment occurs, you may not immediately find other best FDs to invest in as the interest rates in the market always fluctuate depending on the market condition, in case of a decrease in the interest rate, you can’t find the corporate FD that offers same or better return than your previous investment. That way you may have to wait.
Inflation risk
When inflation is on the rise, the purchasing power of the existing money may seem lower. If the returns on the FDs do not surpass the inflation rate, it means you are receiving lower returns. That way you need to look for those corporate FDs that beat the inflation rate.
Best Corporate FD Rates 2024
| Corporate FDs | Tenure | Interest |
|---|---|---|
| Shriram Finance FD | 1 to 5 years | 7.59% to 8.47% |
| Muthoot Capital FD | 1 to 5 years | 7.21% to 8.38% |
| Manipal Housing Finance FD | 1 to 5 years | 8.25% to 7.75% |
| Mahindra Finance FD | 1 to 5 years | 7.50% to 8.1% |
| Bajaj Finance FD | 1 to 5 years | 7.40% to 8.1% |
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
1. What are the Benefits of Investing in Corporate Fixed Deposits?
The benefits of corporate fixed deposits include higher interest rates compared to other regular low-risk investments; the tenure is flexible, allowing you to decide on how long to stay invested; the credit ratings give a safety measure to decide the instrument you’d like to choose; the premature withdrawal gives a safeguarded cushion to withdraw anytime without having to think much; and the flexible payout options allow you to receive money based on your needs. Lastly, the benefit of diversifying your portfolio against other high-risk investments is to be on the profitable side.
2. 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.
3. 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.
5 Is it Safe to Invest in Corporate FDs?
It is completely safe to invest in corporate fixed deposits offered by reputed companies.
6. 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).
7. 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.
8. 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.
9. 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.
10. 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.
