{"id":15745,"date":"2026-08-21T15:37:56","date_gmt":"2026-08-21T10:07:56","guid":{"rendered":"https:\/\/goldenpi.com\/blog\/?p=15745"},"modified":"2026-08-21T15:45:19","modified_gmt":"2026-08-21T10:15:19","slug":"switching-from-fixed-deposits-to-ncds","status":"publish","type":"post","link":"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/","title":{"rendered":"Switching From FDs to NCDs in 2026: What Investors Should Know"},"content":{"rendered":"<div class=\"gpi-custom-widget-box\" style=\"border-left-color: #0066cc; background-color: #f0f7ff;\">\n<div class=\"gpi-custom-widget-title\" style=\"color: #0066cc;\">\ud83d\udcdd Quick Summary:<\/div>\n<h2 class=\"gpi-custom-widget-h2-content\"><span class=\"ez-toc-section\" id=\"Bank_FD_rates_have_dropped_below_7_A_good_NCD_now_pays_8_to_10_That_gap_makes_many_people_ask_if_they_should_switch_from_FDs_to_NCDs_But_an_NCD_is_not_a_free_upgrade_It_can_lose_money_if_the_company_behind_it_fails_it_has_no_deposit_insurance_and_you_cannot_break_it_early_like_an_FD_This_guide_explains_in_plain_words_when_the_switch_makes_sense_and_when_it_does_not\"><\/span><span style=\"font-weight: 400;\">Bank FD rates have dropped below 7%. A good NCD now pays 8% to 10%. That gap makes many people ask if they should switch from FDs to NCDs. But an NCD is not a free upgrade. It can lose money if the company behind it fails; it has no deposit insurance, and you cannot break it early like an FD. This guide explains, in plain words, when the switch makes sense and when it does not.<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<\/div>\n\n\n<p>Bank FD rates have fallen. In 2025, the RBI cut its main rate by 1.25 percentage points, down to 5.25% presently. Big banks now pay under 7% on most FDs. So if your FD is ending or you hold an old one at a low rate, it is fair to ask whether to switch or not.<\/p><div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/#Bank_FD_rates_have_dropped_below_7_A_good_NCD_now_pays_8_to_10_That_gap_makes_many_people_ask_if_they_should_switch_from_FDs_to_NCDs_But_an_NCD_is_not_a_free_upgrade_It_can_lose_money_if_the_company_behind_it_fails_it_has_no_deposit_insurance_and_you_cannot_break_it_early_like_an_FD_This_guide_explains_in_plain_words_when_the_switch_makes_sense_and_when_it_does_not\" >Bank FD rates have dropped below 7%. A good NCD now pays 8% to 10%. That gap makes many people ask if they should switch from FDs to NCDs. But an NCD is not a free upgrade. It can lose money if the company behind it fails; it has no deposit insurance, and you cannot break it early like an FD. This guide explains, in plain words, when the switch makes sense and when it does not.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/#How_Much_Does_an_NCD_Pay_More_Than_an_FD\" >How Much Does an NCD Pay More Than an FD?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/#What_You_Give_Up_by_Switching_to_an_NCD\" >What You Give Up by Switching to an NCD<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/#Should_You_Rush_Before_the_RBI_Cuts_Rates\" >Should You Rush Before the RBI Cuts Rates?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/#Will_You_Pay_More_Tax_After_Switching\" >Will You Pay More Tax After Switching?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/#Is_It_Worth_Breaking_an_FD_Early\" >Is It Worth Breaking an FD Early?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/#Who_Should_Switch_and_Who_Should_Stay\" >Who Should Switch, and Who Should Stay<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/#Frequently_Asked_Questions\" >Frequently Asked Questions<\/a><\/li><\/ul><\/nav><\/div>\n\n\n\n\n<p>An NCD is a bond. A company borrows your money and pays you fixed interest for a set number of years. It works like an FD, but the borrower is a company, not a bank. That one change is why an NCD pays more and why it carries more risk. It is the heart of the choice.<\/p>\n\n\n\n<p>So the switch question is not about one being good and one being bad. A switch is a personal call, not a rule. It is about whether the extra interest is worth the extra risk for you.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"How_Much_Does_an_NCD_Pay_More_Than_an_FD\"><\/span><strong>How Much Does an NCD Pay More Than an FD?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The main reason to switch from FDs to NCDs is the higher interest. As FD rates fell, the gap between bonds and deposits grew wide.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><div class=\"pcrstb-wrap\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Instrument<\/strong><\/td><td><strong>Typical Rate in 2026<\/strong><\/td><td><strong>Backed By<\/strong><\/td><\/tr><tr><td>Large bank FD<\/td><td>6.25% to 7%<\/td><td>Deposit insurance up to Rs 5 lakh<\/td><\/tr><tr><td>AAA-rated PSU or NBFC bond<\/td><td>7.4% to 8.3%<\/td><td>Government-owned or top-rated company<\/td><\/tr><tr><td>AA-rated NCD<\/td><td>8% to 9.5%<\/td><td>Company balance sheet<\/td><\/tr><tr><td>A-rated NCD<\/td><td>9.5% to 11.5%<\/td><td>Company balance sheet, thinner cushion<\/td><\/tr><\/tbody><\/table><\/div><\/figure>\n\n\n\n<p>The table shows it plainly, and it is the strongest case to switch. A safe, highly rated NCD can pay about 1.5 to 3 percentage points more than a bank FD for the same number of years. On a large amount held for a few years, that adds up to real money. This is the main pull to switch.<\/p>\n\n\n\n<p>There is a second reason. FD rates may not rise again soon. If the RBI keeps rates low, a maturing FD will only renew at today&#8217;s lower rate. So an FD-to-bond migration now locks in a higher rate while it lasts. For someone who wants steady income, that certainty is another reason to switch.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_You_Give_Up_by_Switching_to_an_NCD\"><\/span><strong>What You Give Up by Switching to an NCD<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Every reason to switch has a cost. Being honest about these costs is what keeps a smart choice from turning into a chase for a big number.<\/p>\n\n\n\n<p><strong>No deposit insurance.<\/strong> A bank FD is protected by the government up to 5 lakh rupees per bank. An NCD is not. If the company fails, you depend on its assets and where you stand in the queue to be paid, not a guarantee.<\/p>\n\n\n\n<p><strong>A real chance of default.<\/strong> An NCD pays more because it can fail to pay. Two large lenders, IL&amp;FS and DHFL, both had top ratings when they collapsed. A rating helps, but it is only today&#8217;s opinion, not a promise.<\/p>\n\n\n\n<p><strong>Harder to get out.<\/strong> You can break an FD any day for a small penalty. An NCD can only be sold on the stock exchange, at that day&#8217;s price, which may be less than you paid.<\/p>\n\n\n\n<p>Put together, these are why the FD vs NCD decision is a real trade, not a free upgrade. The higher interest is your payment for taking on all three. Weigh that before you switch.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Should_You_Rush_Before_the_RBI_Cuts_Rates\"><\/span><strong>Should You Rush Before the RBI Cuts Rates?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The common pitch is to switch now, before the RBI cuts rates again and new NCDs pay less. It is worth a closer look, because this reason to switch is weaker than it sounds.<\/p>\n\n\n\n<p>The RBI has kept its rate at 5.25% all year. Most experts now think it will stay there for the rest of 2026. A few even expect a small rise. So the &#8220;act now before the next cut&#8221; pitch rests on a cut that may not come soon.<\/p>\n\n\n\n<p>This does not kill the case for switching. It just changes it. The real reason is simpler: an NCD pays more than an FD today, whatever the RBI does next. Make the decision on that gap and your own comfort with risk, not on a rate guess no one can get right. The decision should not solely rest on timing.<\/p>\n\n\n\n<p>And if a cut does come later, an NCD you buy now keeps paying its fixed rate anyway. That is a nice bonus of an FD to bond migration made while rates are high, but it is not the main point.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Will_You_Pay_More_Tax_After_Switching\"><\/span><strong>Will You Pay More Tax After Switching?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Many people expect a bond to save tax. It usually does not, so tax should not push the FD vs NCD decision either way.<\/p>\n\n\n\n<p>If you switch, both FD interest and NCD interest are taxed the same way. They are added to your income and taxed at your slab rate. There is no special lower rate for either. So on tax, it is a tie.<\/p>\n\n\n\n<p>One thing works differently. On a bank FD, the bank cuts TDS, which is tax taken at source, at 10% once interest crosses 50,000 rupees a year. On a listed NCD held in demat form, no TDS is cut, but you must still report the interest yourself and pay the tax. No TDS is not a saving. It is only a timing difference, and forgetting to report it is a common mistake.<\/p>\n\n\n\n<p>Capital gains tax only comes in if you switch and then sell before the bond matures. A listed bond sold at a profit after one year is taxed at 12.5%. Held to the end, there is no capital gain at all, only the taxed interest. So for a buy-and-hold FD to bond migration, tax stays simple.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Is_It_Worth_Breaking_an_FD_Early\"><\/span><strong>Is It Worth Breaking an FD Early?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>There is a big difference between moving a maturing FD and breaking one that is still running. Moving a maturing FD is easy. But to exit an FD early for an NCD, you need a quick sum first. Do not exit on a whim.<\/p>\n\n\n\n<p>Breaking an FD early to switch costs a penalty, usually 0.5% to 1%, and you lose some interest. So to exit an FD early for an NCD only makes sense if the higher interest more than covers that penalty. Do not exit before checking.<\/p>\n\n\n\n<p>Do the calculations before any FD to bond migration. If your FD has three years left at 6.5% and an NCD pays 9% for a similar term, the extra 2.5% a year usually beats a one-time penalty, so exiting early can be worth it. But if your FD ends in three months, breaking it early is rarely worth it. Rather than exiting, just wait and move the money when it matures.<\/p>\n\n\n\n<p>The simple rule: move a maturing FD freely, but only exit early when the interest gap is wide and you have enough years left. Otherwise, do not exit early at all.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who_Should_Switch_and_Who_Should_Stay\"><\/span><strong>Who Should Switch, and Who Should Stay<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>No single answer fits everyone. The FD vs. NCD decision depends on you and what the money is for, so treat it as personal.<\/p>\n\n\n\n<p>Switch if you can hold the bond to the end, can handle the small chance of a default without it hurting your life, and are willing to check a company&#8217;s rating before you buy. For this person, a switch into a highly rated bond is a sensible way to earn more than a deposit and a fair decision.<\/p>\n\n\n\n<p>Stay in an FD if you value the insurance and the freedom to break it anytime more than the extra interest. Also stay if the money is an emergency fund you might need urgently. There is nothing wrong with the safer, lower-paying option, and no need to switch for money you cannot risk.<\/p>\n\n\n\n<p>For many people, the best answer is a mix. Keep your emergency and short-term money in FDs, and move only the part you can lock away for longer terms into highly rated NCDs. That partial migration is not all-or-nothing; you get some of the extra interest without giving up all of the safety.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span><strong>Frequently Asked Questions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1787306539273\"><strong class=\"schema-faq-question\">Q1. <strong>Is it a good time to move money from fixed deposits to NCDs?<\/strong><\/strong> <p class=\"schema-faq-answer\"> The case to switch rests on the interest gap, which is wide in 2026, with NCDs paying 8% to 10% against FDs under 7%. It is a fair time to switch if you can hold to the end and accept some risk. But it is less about timing the RBI and more about that standing gap.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1787306549175\"><strong class=\"schema-faq-question\">Q2. <strong>What are the risks of switching from FD to NCD, or of choosing to exit FD early for NCD?<\/strong><\/strong> <p class=\"schema-faq-answer\"> Three main ones. No deposit insurance, so you rely on the company&#8217;s health. A real chance of default, since an NCD can fail while an insured FD cannot. And it is harder to sell, since an NCD is exited on the exchange, not broken on demand.\u00a0<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1787306559506\"><strong class=\"schema-faq-question\">Q3. <strong>Do NCDs offer higher returns than bank FDs in 2026?<\/strong><\/strong> <p class=\"schema-faq-answer\"> Yes, usually. A highly rated NCD pays roughly 1.5 to 3 percentage points more than a large bank FD for a similar term. That extra is the reward for taking company risk and giving up insurance, which is the heart of the FD vs NCD decision.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1787306570779\"><strong class=\"schema-faq-question\">Q4. <strong>Are NCD returns guaranteed like fixed deposits?<\/strong><\/strong> <p class=\"schema-faq-answer\"> No. A bank FD is insured up to 5 lakh rupees, and the return is as good as guaranteed. An NCD&#8217;s interest is fixed but not guaranteed, since it depends on the company staying able to pay.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1787306583285\"><strong class=\"schema-faq-question\">Q5. <strong>What are the tax implications of switching from FD to NCD?<\/strong><\/strong> <p class=\"schema-faq-answer\"> Very little changes. Both FD and NCD interest are taxed at your slab rate. FDs have TDS cut; listed NCDs do not, but you must report the income yourself. Tax is not a reason to switch, since neither is more tax-friendly on interest.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1787306595769\"><strong class=\"schema-faq-question\">Q6. <strong>Can I withdraw money from an NCD before maturity?<\/strong><\/strong> <p class=\"schema-faq-answer\"> Only by selling it on the stock exchange, at that day&#8217;s price, which can be above or below what you paid. Unlike an FD, an NCD cannot be broken on demand, which is why you exit early only after doing the math.<\/p> <\/div> <\/div>\n\n\n\n<script type=\"application\/ld+json\">\n[\n  {\n    \"@context\": \"https:\/\/schema.org\",\n    \"@type\": \"NewsArticle\",\n    \"@id\": \"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/#article\",\n    \"isPartOf\": {\n      \"@id\": \"https:\/\/goldenpi.com\/blog\/bond-news\/switching-from-fixed-deposits-to-ncds\/\"\n    },\n    \"headline\": \"Switching From FDs to NCDs in 2026: What Investors Should Know\",\n    \"description\": \"Thinking of moving money from fixed deposits to NCDs? 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FDs have TDS cut; listed NCDs do not, but you must report the income yourself. Tax is not a reason to switch, since neither is more tax-friendly on interest.\"\n        }\n      },\n      {\n        \"@type\": \"Question\",\n        \"name\": \"Can I withdraw money from an NCD before maturity?\",\n        \"acceptedAnswer\": {\n          \"@type\": \"Answer\",\n          \"text\": \"Only by selling it on the stock exchange, at that day's price, which can be above or below what you paid. 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A good NCD now pays 8% to 10%. That gap makes many&hellip;<\/p>\n","protected":false},"author":15,"featured_media":15748,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[25],"tags":[],"class_list":["post-15745","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bond-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Switching From FDs to NCDs in 2026: What Investors Should Know<\/title>\n<meta name=\"description\" content=\"Thinking of moving money from fixed deposits to NCDs? 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