We all know that banks and post offices offer Fixed Deposits. However, banking regulator RBI also allows certain Finance and Non-Banking Financial Companies (NBFCs) to accept deposits from customers. These deposits are known as Corporate Fixed Deposit (FD). They are also popularly known as Company Deposits (CD). Key highlights of Corporate FD are:
- Offer fixed interest rate like bank fixed deposits.
- Rate of interest offered is generally higher than prevailing bank/post office FD rates.
- Can be started as low as Rs. 10,000/-.
- Nomination facility available.
- Tenure generally varies between 3 months to 5 years.
- Offer various interest pay out options similar to bank/post office fixed deposits.
- These company deposits (CD) are not affected by stock market fluctuations.
- Safety rating for Corporate Fixed Deposits are provided by credit rating agencies, so good/higher rating indicates lower risk and better assurance.
- Premature withdrawals are available, premature penalty levied is generally less compared to bank/post office fixed deposit.
Who can invest in CDs? Resident Individuals, NRIs, Institutions, Companies, Trusts etc.
Where to buy Corporate FDs? These are mostly sold by stock brokers/securities companies, insurance brokers, investment advisers, wealth advisers. If you have an online trading account, it must be available right there.
Are Corporate Fixed Deposits riskier? Yes, in comparison to bank/post office fixed deposits these are riskier as companies may default/ delay payments. There is no insurance coverage for corporate deposits unlike DICGC which provides cover of five lakh for bank deposits.
Disclaimer: Please read the complete details of the scheme before investing.