Various investment options currently exist in India, with different returns and risk factors. Ideally, investors seek an investment scheme with high returns and low risk. Fixed deposits offer a great balance between the two aspects.
When non-banking financial companies (NBFCs) and housing finance companies (HFCs) issue fixed deposits, they are called corporate fixed deposits. These FDs have gained much attention in the investment market for their beneficial features and perks. That said, the interest rate is often the major factor investors base their decisions on.
They are much appreciated for their competitive interest rates, and we are sure you’ll find them higher than normal too. Join us as we explore the interest rates of corporate fixed deposits and compare them with the interest rates of other investment options to find your ideal financial match.
Key Takeaways
- The interest in corporate fixed deposits is up to 9.20%—not slightly but much better than other government schemes and regular FDs.
- Senior citizens have an additional 0.5% interest rate benefit.
- The interest rates are fixed, which is stable and predictable in nature.
- Comparatively, the interest rate in CFDs (9.20%) is higher than bank FDs (7.5%), post office savings schemes (7.5%), and government schemes (7.5 to 8.2%).
- Pick a well-rated corporate FDs, ideally above A, compare the interest rates available with all the options and use them to diversify your portfolio for safety.
Interest Rates of Corporate Fixed Deposits
You select a corporate fixed deposit and invest, and the amount is locked in for a pre-decided tenure that can range between a few months and a few years. During this tenure, the FD fetches interest at a pre-determined rate. Note that the FD can generate a regular (monthly, quarterly, or annually) payout along with a cumulative payment on maturity, where you receive both accumulated interest rates and the principal on maturity.
You can avail up to 9.20% interest rates on corporate fixed deposits with a minimum investment of Rs. 5000. The rate can increase by another 0.5% for senior citizens.
Comparing Corporate Fixed Deposits Interest Rates
Corporate fixed deposits generally fall into investments with comparatively lower risk categories. The following comparison of interest rates is done with similar, low-risk investment tools.
Corporate FDs vs Bank FDs
Features like simple investment procedures, assured interest rates, and less-risk levels make fixed deposits attractive investment tools for individuals, regardless of their risk appetite and investment experience. Corporate fixed deposits follow the same mechanisms as traditional fixed deposits, with some distinctive attributes.
With tenures ranging from a week to 10 years, the interest rates on bank FDs can go up to 7.50%. Senior citizen FDs can enjoy an additional 1%, which makes it 8.50%. For both regular and senior investors, corporate FDs come with a higher interest rate.
Corporate FDs vs Government Schemes and Post Office Savings Schemes
The layer of safeguarding that the Government offers can turn any scheme into a highly secure investment option. Furthermore, the interest rates of certain Government schemes are tax-exempt. Post office savings schemes have the same advantages as Government saving schemes.
However, the interest rates of Government and post office saving schemes can be lower in comparison to the rates of corporate fixed deposits. The interest rates for government savings schemes can range from 7.5% to 8.2%. Post office savings schemes can offer up to 7.5% interest. The Senior Citizens’ Savings Schemecan offerr an 8.2% interest rate.
Corporate FDs offer a higher interest rate of up to 9.2% p.a to all investors than government and post office saving schemes.
Comparing Assurance on Interest Rates
A high-interest rate is indeed an alluring feature; however, the assurance of the same should not be avoided. Market fluctuations influence some investment tools, while others remain intact regardless.
Basically, in some investment schemes, you start investing for a certain interest rate, but it can change, as in increase or decrease, as per the market rates. This floating interest rate allows you to enjoy the highest rates throughout your tenure but also makes you subject to lower interest rates than you initially received.
The interest rates on Corporate FDs generally stay the same throughout the tenure, ensuring fixed returns, irrespective of market conditions.
Corporate Fixed Deposit Interest Rates Calculation
Corporate FDs can be either cumulative or non-cumulative. A non-cumulative FD continues to accumulate interest at a fixed rate on the principal amount throughout the tenure. On the contrary, the interest is re-invested in cumulative FDs, increasing the principal amount at every compounding interval.
How are corporate fixed deposit interest rates calculated?
There are two formulas!
Simple Interest Formula
(P x R x T) / 100
Here, P stands for the principal investment amount.
R is the interest rate
T is the tenure in years.
Suppose you have invested ₹ 10,00,000 at an interest rate of 6% for 5 years.
Therefore, the total interest earned on the investment (when it is non-cumulative)= (10,00,000*6*5) / 100 = ₹ 3,00,000
Compound Interest Formula
P (1 + r/n)nt – P
Here, P is the principal amount invested.
r indicates the interest rate
n implies the number of times the interest is compounded per year,
t stands for the investment tenure in years.
Let’s take the previous investment plan of ₹ 10,00,000 at an interest rate of 6% for 5 years. The interest is compounded annually.
Therefore, the total interest earned on the investment (when it is cumulative)
= 10,00,000 (1 + 0.06/1)1 x 5 – 10,00,000
= 13,38,226 – 10,00,000
= ₹ 3,38,226
You get this amount and the principal of Rs 10,00,000.
3 Key Corporate Fixed Deposit Investment Strategies
You can select the ideal investment option and maximize your returns with the following corporate fixed deposit investment strategies!
Credit Rating Analysis
CRISIL, ICRA, CARE, and other credit agencies assign credit ratings to corporate fixed deposits after thorough analysis. These credit ratings range from AAA, indicating the lowest risk of default, to D, signifying the highest default risk. Pick corporate bonds with AAA, AA+, or AA to ensure security.
Interest Rate Comparison
While corporate FD rates are higher compared to many other investment options, it is important to check out the interest rates of your prospective options. Choosing a corporate FD with the highest interest rate ensures maximum returns.
Investment Diversification
It is one of the smartest corporate fixed deposit investment strategies to strengthen your investment portfolio. Strategically dividing your investment will enable you to maximize returns and associated investment perks.
Comparison of Bank FD and Corporate FD Interest Rates
| Bank | Interest Rate | Company | Interest Rate |
|---|---|---|---|
| IndusInd Bank | 7.25% | Shriram Finance FD | 8.80% |
| HDFC Bank | 7% | Bajaj Finance FD | 8.10% |
| Axis Bank | 7% | Mahindra Finance FD | 8.05% |
| ICICI Bank | 7% | Muthoot Capital FD | 7.50% |
| SBI Bank | 6.50% | LIC Housing Finance FD | 7.50% |
| Kotak Mahindra Bank | 6.20% | PNB Housing Finance FD | 7.40% |
Invest in the Top Corporate Fixed Deposits with GoldenPi
Finding a reliable investment platform can make any investor’s journey smooth and rewarding. It is where GoldenPi comes into the picture. Ours is a comprehensive investment platform where you can get all the information you need to complete your research, enjoy investing, and monitor your investments.
Investing in corporate FDs on GoldenPi is easy and requires only three steps. Complete the KYC. Then, explore your options. You will get a list of the best corporate FDs with their credit ratings, interest rates, tenures, and other details. Once you have selected the FD, pay to finalize the investment.
You will receive notifications on the maturity of your investments. We will also regularly update our database to fetch you the latest details and rates.
FAQs about Corporate Fixed Deposits
1. How do the interest rates of corporate fixed deposits compare to other investment options?
Corporate FDs are higher return-giving instruments, also offering additional interest benefits of about 0.5% for senior citizens.
2. Which corporate FD is best?
A corporate FD with an AAA rating, offering one of the highest interest rates in the market, flexible tenure, and amicable terms, is the best option.
3. Can you break corporate FD before maturity?
You can make a partial withdrawal from corporate FD or break it before maturity. The terms of partial withdrawal and charges vary from one FD to another.
4. Are corporate fixed deposits risky?
Corporate fixed deposits issuing NBFCs operated under the regulations set by the RBI. Credit agencies evaluate the FDs based on a variety of essential factors. Select a high-rated corporate FD, and you can reduce the risk factors significantly while enjoying returns.
5. Are the returns on Corporate FDs taxable?
The interest rate on corporate FD is taxed according to the tax slab an individual falls under. At source, a tax of 10% is deducted from the payable interest only if the interest earned is equal to or greater than Rs 5000/- in the financial year. To avoid TDS, you can submit Form 15G / 15H if you’re a resident of India. If you are considering submitting it, then you must do it every year until maturity.
6. What is the easiest way to calculate corporate fixed deposit returns?
Use the corporate FD calculator on GoldenPi to calculate returns quickly, efficiently, and without any hassle.
7. Do all corporate FDs offer regular payouts?
Regular payouts and intervals differ based on the corporate FD-using entity. Some corporate FDs may generate monthly, quarterly, half-yearly, and yearly payouts, while others will generate the principal and accumulated returns on maturity.
8. Is KYC compulsory for investing in corporate FDs?
You will have to complete your KYC with the required documentation when investing in corporate FDs on GoldenPi.
