Corporate deposits or company fixed deposits are term deposits wherein you put your money for a fixed tenure at a fixed rate of interest, not with banks but with non-banking financial companies (NBFCs) and other financial institutions. Compared to a regular bank fixed deposit, they fetch a higher rate of interest. The maturities of company FDs range from a few months to a few years. Like bank FDs, corporate FDs also offer some incremental interest for senior citizens.

Who Should Invest in Corporate FDs

If you have a short-term financial goal such as saving for an international trip or buying some gadget, corporate fixed deposits can be a good investment option. However, corporate FDs are not insured by the DICGC (i.e. deposit insurance of up to ₹5 lakh which is only available for Bank FDs). To overcome this concern, ensure you check that the basic fundamentals of the company are strong and the company enjoys a good credit rating. It is ideal to invest in a high-rated corporate deposit with AAA or equivalent rating. It signifies the highest safety with regard to payment of interest and the principal. As you go lower in the rating chart, the degree of safety reduces.

Why You Should Invest in Corporate FDs

Corporate fixed deposits fare better than Bank FDs as they offer a significantly higher interest rate. The interest rate difference between regular Bank FDs and corporate fixed deposits is generally in the range of 1% to 3%. This seemingly small difference can have a sizable impact on your corpus in the long run.

Similar to Bank FDs, a corporate fixed deposit can also be used to avail loan facility when you require the funds in case of an emergency. The sanctioned amount can vary from one financial institution to the other. Usually, it can go as high as 75% of the fixed deposit amount.