In such a situation, if you are thinking of making an FD now, then the opportunities are not over yet. You can opt for corporate FD. Corporate FD is still getting up to 9.40% interest. After all, what is corporate FD and how can you invest in it? What things to keep in mind? Let us give you complete information.

What is Corporate FD?

Corporate FD or Company Fixed Deposit is issued by Non-Banking Finance Company i.e. NBFC companies. In simple words, it is also called company deposit. In this also, like bank FD, a fixed interest rate is given to the investors. Its duration can be from a few months to years. Only NBFC companies recognized by RBI can accept deposits in corporate FD.

What is the difference between bank and corporate FD? 

The biggest difference between bank FD and corporate FD is that since corporate FD is issued by NBFC, the interest rate in it is higher, so that investors who make FD in the bank are more attracted towards corporate FD. Here, like bank FD, the time limit plays an important role in the interest rate.

The second difference between bank FD and corporate FD is security. In bank FD, insurance up to Rs 5 lakh is given by DICGC. In such a situation, if the bank collapses, the money will be given to the investor who has made the FD by DICGC. However, no such insurance is available in corporate FD. If the NBFC company collapses, then your money also sinks with it.

Be sure to check the rating before investing 

Before investing in corporate FDs it is better to compare the corporates first and check if they have good ratings from CARE, CRISIL and ICRA. AAA rating is considered the best. Investors should also look at the track record of the company’s profit and loss. Most banks charge a penalty to FD investors for premature withdrawal. This usually happens around 3 months after the investment.

Disclaimer : This article is written for informational purposes only. Consult your financial advisor before making any kind of investment or taking any financial risk. rightsofemployees will not be responsible for any kind of risk.

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Corporate FD is becoming increasingly popular. In the era of decreasing interest on FD, people are looking for other means of investment. In such a situation, people have seen corporate FD as a better option. However, the problem is that people start investing on hearsay, due to which they have to repent later. Today we are going to tell you some things about corporate FD, which very few people know.

What is corporate FD?

Corporate or company FD is a term deposit. These FDs are issued by finance, housing finance companies and other NBFCs. This is a good way for companies to raise money from the general public. In this, the return is fixed like bank FD, but its interest rate is usually higher than bank FD.

Do this work first

Be it corporate FD or any other investment, one should not invest without setting financial goals. This will let you know how much money you will need in how much time. Invest accordingly. Financial goals can include things like retirement planning, buying a car, house, marriage, child’s education.

Compare these things

After deciding the financial goal, one should compare the interest rates, tenure and minimum deposit of various corporate FDs. By investing without investigating the features and suitability of a corporate FD, i.e. how suitable it is for you, you can invest money in a low yielding FD.

It is important to pay attention to credit rating

Before investing in corporate FD, definitely consider the rating. Top credit rating agencies in India rate company fixed deposits. These include CARE, ICRA and CRISIL. Always choose FD with AAA rating and check the ratings of not just one but different agencies. Stay away from low rated or unrated corporate FDs, even if they offer high returns.

Greed for higher returns will prove costly

Many people invest in corporate FDs only after seeing high returns, which is not the right approach. Before investing in FD, it is important to look at the company’s past track record, financial strength and interest pay out. It is better to stay away from companies which are not well-known and are in financial or management trouble. Your hard-earned money can get stuck if you invest money in wrong company’s FD.

Do not exit before this time

If the company closes the FD before maturity i.e. completion of tenure, it may have to pay loss of interest and penalty. Premature withdrawal of money from corporate FD may result in loss of 2 to 3 percent in interest. Therefore, choose the tenure of FD carefully and maintain the investment till the end.

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