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Corporate Fixed Deposit

Fixed Deposit Fixed Deposit also popularly known as Term Deposit is an investment option wherein interest rate is fixed for a predefined term and is one of the most preferred investment options among conservative investors who need fixed and regular income. Deposits placed by an investor with companies are known as Company Fixed Deposit. These deposits are accepted by manufacturing companies, financial institutions and non-banking finance companies. Deposits mobilized by these companies are governed by the Companies Act u/s 58A. The maturities of various company fixed deposits can range from a 12 months to a few years.

Why to invest?

Mostly Corporate FDs offer higher interest rates when compared to bank FDs. Just like bank FDs, a corporate fixed deposit can be utilized to avail loan facility in case of an emergency.

Who Should Invest?

Conservative investors and those who want fixed monthly income can consider investing in corporate FDs. Corporate FDs are a good option for short term goals like investing for an international trip or buying a gift. There was one caveat though: corporate FDs are not covered by the DICGC (deposit insurance of up to ₹5 lakh which is only available for Bank FDs). 

How to select a corporate fixed deposit?

Company’s Background

Investigating the company's background before starting a FD is a wise move. Investors can browse the websites of the financial institutions and compare their options before taking a decision.

Credit Rating

Investors can check the credit ratings to ascertain the risk level of the institutions before starting a FD. The better the grade, the safer the investment will be. The ratings are given by Credit Rating Agencies.

Benefits of the Company/Corporate Fixed Deposits

Safety

Fixed deposits are considered to be one of the safest investment options. This is because their returns are not linked with the market.

Liquidity

Investment in Fixed Deposit is locked away for a tenure which you choose. However, pre-mature withdrawals are allowed after a certain period.

Fixed & Higher Returns

Interest rate earned on Fixed Deposit will remain fixed during the tenure which you choose. Also, interest rates offered by Corporate FDs are generally higher as compared to Bank FDs.

Tenure

Investment in Fixed Deposits can be for various tenures. Tenure ranging from 1 year to 5 years provides you an option to choose a tenure that fits your financial goals.

Flexibility

Depending on your need, one may opt for monthly, quarterly, half-yearly, yearly payout or cumulative interest option.

Higher Credit Rating

Investment in Corporate FDs which have been allotted higher credit rating.

Other Features of Fixed Deposit

Senior Citizen Advantages

Higher interest rates are offered for senior citizens.

Tax Deducted At Source (TDS)

TDS is not applicable if interest earned is equals to or less than 5,000 for a year in a single company.