We are well acquainted with the term fixed deposit, but a Corporate fixed deposit is something not many people have heard about. A corporate fixed deposit is a hidden gem in fixed deposits.
They are the safest investment avenues that render higher interest rates. Reputed financial institutions like Shriram Finance render interest rates as high as 8.75% and an additional 0.50% for Senior citizens.
Corporate fixed deposits are a smart investment as they provide guaranteed returns at higher interest rates than most banks and allow you to take out emergency loans.
Here are a few things one needs to consider while investing in a corporate fixed deposit.
What is Corporate Fixed Deposit?
Corporate deposits, also known as company fixed deposits, are term deposits in which you deposit funds for a set period at a predetermined interest rate. They are provided by Non-Banking Financial Companies (NBFCs) and other financial entities. They pay a greater interest rate than a typical bank fixed deposit.
6 Things You Need to Know About Corporate Deposit
The term “corporate fixed deposit” scheme has always been in the market, although it can sound new to you. The listed below will help you understand the importance of corporate fixed deposits.
- High-Interest Rates
NBFCs help you to provide the highest interest rate on fixed deposits. For example, Shriram Finance offers the highest interest rate of 8.75%, along with several additional interest benefits, such as 0.50% interest for Senior Citizens.
One can also avail of an additional interest rate of 0.25% upon renewal of the matured deposit.
- Cumulative & Non-cumulative Fixed Deposit:
There are two types of FDs available in a corporate fixed deposit.
In a Cumulative Fixed Deposit, the interest earned is reinvested in a fixed deposit and the investor will get the capital and the interest earned at the maturity period.
In a Non-Cumulative Fixed Deposit, there is an option for interest payout on a monthly, quarterly, half-yearly or yearly. At the maturity period, you will get your capital amount back.
- Flexible Tenure Period
Usually, NBFCs provide you flexible tenure period from which you can choose your fixed deposit investment.
- Guaranteed Returns
The NBFCs are rated for safety by CRISIL/ICRA/India Rating & Research, a corporate fixed deposit is safe and returns are assured.
- Interest Payout
The NBFCs allow you to select if you want to payout your interest monthly, quarterly, half-yearly and annually, depending on your requirement.
- Penalty Charges
Every fixed deposit from banks is subjected to a three months lock-in period. Although, with NBFCs, you can withdraw money by paying some penalty from your fixed deposit anytime in times of emergencies.
Benefits of a Corporate Fixed Deposit
- Corporate fixed deposits are a low-risk, high-return investment option
- They have easy and quick withdrawal
- Flexible payment tenures
- Fixed interest rates till the maturity period
- It has short-term to long-term investment choices
Tips to Choose the Right Company to Invest in a Corporate FD
Below are a few tips to help you choose an NBFC with the highest interest rate:
- Some NBFCs provide attractive returns, but you must check the ratings of your NBFC before investing.
- You must check an NBFC with a better track record within a particular rating guide.
- Once you have selected your NBFC, choose the scheme that has shown you promising results.
- Select a cumulative scheme that helps to generate a stable and regular income if you require a monthly income.
Invest in The Best Corporate Deposit
In the financial industry, competition is growing rapidly; many new investors are entering the market with attractive interest rates. Be cautious when you are selecting an NBFC to make your investment.
Always invest in a reputed NBFC such as Shriram Finance, as they hold a legacy of trust of over 2.1 million customers in the investment market. Ensure to research and invest for the tenure and interest rate best suits your needs.
- Corporate Fixed Deposits come with a premature withdrawal option on a fixed deposit account. Penalty charges are applicable for premature withdrawal.
- Individuals can claim a loan against their corporate fixed deposit in case of an emergency financial need.
- The interest income earned from the company fixed deposit is not exempted from tax.
- Depositors must carefully examine the ratings assigned by recognised rating agencies such as CRISIL, CARE, ICRA etc., before investing in a corporate fixed deposit.