The investment market currently brims with choices from prominent banking and Non-Banking Financial Corporations that promises to synchronize with every investors’ goals. Fixed deposits are the popular investment tools, owing to its independence of market fluctuations. However, investors are often divided while deciding between bank FDs and corporate fixed deposits. In spite of the higher FD rates, investors are hesitant to choose a corporate FD scheme because of the misunderstandings and obliviousness persisting around it.
This comprehensive guide has been drafted to acquaint investors on corporate FDs and bust some widespread concerns about this high return, low-risk investment option.
What are corporate FDs?
Corporate FDs or company FDs are fixed deposit schemes issued by the housing finance companies, finance companies or other types of NBFCs. The corporate FD rates are generally higher than bank FD rates. Hence it ensures an assured high return with the same low-risk factor of bank FDs.
Prevalent concerns on Corporate FD
1. Are corporate FDs safe?
Corporate FDs are safer than bank FDs with assured higher returns. Investors can compare the trustworthiness and performance of various NBFCs through safety ratings provided by the reputed CRISIL, CARE and ICRA before making an informed decision. A prominent HFC, PNB Housing Finance, for example, has been graded the highest safety rating of FAAA on its fixed deposits by CRISIL.
2. Do Corporate FDs provide better returns than bank FDs?
The current interest rates provided by bank FDs in India ranges from 4% to 8%. The interest rates offered by corporate FD schemes by NBFCs are higher than regular bank FDs. With higher interest rates, higher returns are guaranteed to investors. PNB Housing Finance, for example, provides interest rates upto 8.40% on its fixed deposit schemes. Senior citizens are eligible for a 0.25% higher interest rates on FDs.
3. Do Corporate FDs provide flexible tenures?
The average tenure of a bank FD ranges from months to years. However, the tenure of bank FD can range from 6 months to years. It thus harmonizes with every investors’ goals, regardless of short or long term.
4. Do Corporate FDs impose stringent rules on premature cancellation?
Investors often turn to liquidate their fixed deposits on an event of immediate financial crunch. The premature withdrawal at NBFC platforms is much more straightforward and hassle-free. Investors are advised to read through the instructions of the lenders to avoid hefty penalty charges.
A popular NBFC platform, PNB Housing Finance, for example, allows its investors, if needed, an easy premature withdrawal process after a lockin period of 3 months. The interest rates and penalty charges, however, vary based on the age of the fixed deposit.
5. Do company FDs have limited payout options?
Company FD schemes offer numerous payout options for investors to choose from, such as monthly quarterly, half-yearly and yearly.
The company fixed deposits are the go-to option among smart investors because of the higher interest rates and returns it promises. Choosing a credible lender with a good rating can assuredly benefit investors in their financial goals. You can also learn about how to save TDS on fixed deposit.