What is Corporate Fixed Deposit?

What is Corporate Fixed Deposit?

Corporate fixed deposits are fixed deposits offered by corporate companies. The corporate fixed deposits work like the regular bank fixed deposits albeit a few changes. Corporate fixed deposits offer a higher rate of interest when compared to bank fixed deposits as the risk involved is higher when it comes to corporate fixed deposits.

Applying for a corporate fixed deposit is no different from applying for a bank fixed deposit. The only difference here being that one should avail the application form either from the company’s official website or at the company itself.

How to choose a Corporate FD?

  • Credit Rating:It indicates the underlying risk of the company. Hence it is better to opt for highly rated FDs.
  • Company Background:It can be assessed through its financials and the viability of its business.
  • Repayment History:Companies with a better repayment history are a safer bet for investors.

Scheme in Corporate FD:

  • A regular income scheme in which interest can be paid at regular intervals viz. monthly, quarterly, half yearly or yearly at the option of the depositor.

Who can open:

  • An Individual in his/her own name.
  • Individuals in their joint names with suitable repayment instructions.
  • Minor represented by parents / guardian.

Clubs, Societies, Associations, Educational Institutions, Trusts, Firms, Partnerships, Joint Stock Companies, Executors, Administrators, HUFs, Govt. Departments, etc.

Why invest in a Corporate Fixed Deposit?

 💡 Higher Interest

You get a higher rate of interest than a fixed deposit. In times of inflation, you get higher returns, than other fixed income securities.

 💡 Safety Depending on Rating

An investment in corporate fixed deposits of high rating, is relatively safe. Higher the rating, more is its safety.

💡 Benefits Senior Citizens

Senior citizens get a higher rate of interest than a younger person. NRI’s can also invest in corporate fixed deposits.

💡 Invest in Bank Corporate FD

If you invest in corporate fixed deposits of reputed banks, you have a higher degree of safety than private Companies.

Important Factors of corporate fixed deposit:

 💡 Check interest rates offered

For obvious reasons, this should be the first step you take because if you don’t then some day you might realise that a company you ignored offers you better interest rates than the current one.

 💡 Check the minimum and maximum amounts

Since most of the companies define what the minimum and maximum amount that can be put in an FD is, it is best to check it. In case you wish to start an FD with Rs. 25,000 but the company you choose allow a minimum of Rs. 50,000 then you will be in a soup.

 💡 Check credit rating

All fixed deposits offered by the various companies come with a credit rating issued by institutions like CRISIL. These ratings will help you determine if you should invest with them or not.

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