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Choose Corporate FDs over Traditional FDs

A Fixed Deposit is often considered as the most effective saving instrument. It comes with a predefined rate of interest and guaranteed returns. Also, it can be easily opened online and is offered by all banks. Keeping these features in mind, have you considered a corporate FD over Traditional FDs? They are equally lucrative and offer higher returns in comparison to Traditional FDs.

What are Corporate FDs?

While standard FDs are offered by banks, Corporate FDs or Company Fixed Deposits are Fixed Deposit Schemes offered by companies and Non-Banking Financial Corporations. Non-Convertible Debentures are also a type of corporate FD.

Companies offer Fixed Deposit Schemes to the public as a practice of raising funds for business expansion or clearing debt. Similar to a bank FD, you are required to invest your money into a corporate house for a fixed tenure, at the end of which, your sum would be returned along with the interest amount.

Features of Corporate FDs

The benefits and features of corporate FDs are:

  1. They are offered as Bonds, Non-Convertible Debentures or as Fixed Deposit Schemes by companies and financial institutions.
  2. They function like normal bank FDs, but come with higher interest rates (9%-13%).
  3. They offer flexibility in terms of selecting your tenor or maturity terms.
  4. Corporate FDs are not influenced by market forces.
  5. Corporate FDs are low-medium risk investments.
  6. They can be easily liquidated.
  7. They offer premature withdrawals without restrictions.
  8. Company FDs offer non-cumulative and cumulative interest pay-outs.
  9. The ratings of corporate FDs are handled by credit agencies like ICRA and CRISIL.
  10. An investor can select the frequency of interest payments: monthly, quarterly, half-yearly, annually, or on a cumulative basis.

The above benefits and features are also the reason why people select Corporate FDs over Traditional FDs.

Corporate Fixed Deposits for 2019

A few corporate FDs for 2019 are:

Name of CompanyCRISIL/ICRA RatingRate of Interest (per annum)
ICICI Home Finance LtdCRISIL FAAA9.33%
DHFLCRISIL* A 1+9.00%
Mahindra Finance LtdCRISIL FAAA9.00%
Shriram Transport Finance LtdCRISIL FAAA8.88%
Shriram City Union Finance LtdICRA MAA+8.88%
Bajaj Finserv LtdCRISIL FAAA8.75%
PNB Housing Finance LtdCRISIL FAAA8.45%
LIC Housing Finance LtdCRISIL FAAA8.35%
HDFC LTDICRA MAAA7.98%
HUDCOICRA MAAA7.50%

Eligibility for Corporate Fixed Deposit

The eligibility criteria to hold a corporate fixed deposit are:

  • Residents of India
  • Members of Hindu Undivided Family (HUF)
  • Partnership companies
  • Corporates
  • Clubs
  • Educational institutions
  • Cooperatives
  • Societies
  • Associations

Tips to Consider Before Investing in a Corporate Fixed Deposit

  1. Market Analysis - Before subscribing to a corporate FD/Bond, ensure that you study the rating assigned to it like AAA and then select the best corporate FD.
  2. List your requirements - Make a list of requirements which are important for the purpose of investing in a Corporate Fixed Deposit.
  3. Review - Make a list of top 5 corporate FDs long with their rate of interest. This will help you evaluate their performance. Post evaluation, invest in the most suitable option.

FAQs on Choose Corporate FDs Over Traditional FDs

Pros and Cons of Bank FD and Corporate FD account?

The pros and cons of Bank and Corporate FD account are:

BenefitsCorporate FDBank FD
Rate of InterestHighLow
Credit RatingsYesNo
Premature WithdrawalsYesYes
Interest payment flexibilityYesYes
FD InsuranceNoYes