CORPORATE FIXED DEPOSITS

CORPORATE FDs Vs BANK FDs 


As we all know, understanding the motivations of investors is important when discussing saves and investments. Although though saving money is one of the most crucial parts of building wealth, it is challenging for anyone to do it consistently. Saving a modest portion of your income will assist you in building wealth so that you can live a decent life and accomplish your objectives and goals.

A well-planned investment and saving routine can help someone exponentially increase their wealth in a number of different ways. One of them is also referred to as a fixed deposit, one of the most popular financial instruments in India. As an all-purpose answer for everyone, from saving for a trip to saving for retirement, FDs have long been one of India's most popular investment products.

Despite the aforementioned investment feelings, fixed deposits are now not the greatest option for long-term goals. Nonetheless, FDs can be a good option if the aim is urgent or has a short time frame. And the simple inclusion of a guaranteed return is the cause of that.

But in front of declining bank fixed deposit interest rates, what should we do? You don't need to be concerned about bank FD interest rates decreasing because you have the choice of investing in corporate fixed deposits instead.

What is a corporate Fixed deposit?

  • The fixed deposit is the most popular type of investment in India. The RBI, like banks, permits certain businesses and NBFCs to accept deposits with a predetermined interest rate and term. Business or corporate fixed deposits are the names given to these sorts of deposits.
  • At contemporary times of high market volatility and unexpected returns, corporate FDs provide the assurance of guaranteed returns and the opportunity to choose the tenure, much like banks. Also, corporate FDs have a greater interest rate than bank FDs. The pay-out option allows investors to choose whether they want to receive a regular income or build up their money.

Corporate FDs are different from Bank FDs in certain ways however their features are similar to each other in a number of ways such as:

  • Both Corporate FDs and Bank FDs provide guaranteed returns. Hence, they allow you to calculate the exact amount that you will receive after maturity on the basis of a pre-determined fixed rate of interest per annum.
  • Corporate FDs typically offer a somewhat greater interest rate for senior citizens than regular bank FDs do.
  • Corporate FD terms generally range from one to five years. It provides freedom to select any duration within that range. Hence, one can choose the tenure with respect to the particular financial goal. For e.g., if your goal is one year away, you should invest for one year; if it is 2.5 years away, you should set your tenure in that manner. The interest rate will vary, though, and the longer the term, the greater the interest rate.

As we have already understood the similarities between corporate FDs and bank FDs and how both have added advantage which help investors in future financial planning in an efficient way.

Let’s have look at the similarities between corporate FDs and bank FDs now:

Corporate FD interest rates are greater than bank FD interest rates. Compared to most banks' FDs, corporate FDs have greater interest rates.

Corporate FDs have shorter early withdrawal penalty term. According to RBI regulations, all fixed deposits must have a minimum three-month penalty term i.e., an early withdrawal fee is incurred if money is withdrawn within the first three months of the tenure.

Conclusion

All NBFCs and businesses must go by stringent guidelines imposed by the Ministry of Corporate Affairs (MCA) and the RBI in order to accept deposits (MCA). However, only a small number of India's over 10,000 NBFCs are permitted to accept deposits from the general public. Investors can invest in corporate Fixed Deposits with the least level of risk by adopting these actions.

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