Corporate Fixed Deposit
Rohan, the managing director of a big company, wanted the best option for his company.
Many corporates and non-financial banking institutions, like banks, enable you to collect fixed deposits for a set period at a predetermined interest rate. These are referred to as corporate fixed deposits. Like bank fixed deposits, corporate fixed deposits offer flexibility in terms of duration and assured returns. Furthermore, these FDs pay a greater interest rate than ordinary bank FDs. Rohan chose them over regular fixed deposits as these are more lucrative and interesting.
How Do Corporate Fixed Deposits Differ From Bank Fixed Deposits?
Here are two distinctions between corporate FDs and bank fixed deposits: The interest rate on corporate fixed deposits is greater than the interest rate on bank fixed deposits: Corporate fixed deposit interest rates are more significant than bank FD interest rates.
For example, RBL Bank FD rates for one year to less than two years are 6.5 per cent, whereas the Bajaj Finserv Fixed Deposit programme offers 6.9 per cent for the same period. Fixed Deposits: FDs from RBL Bank and Bajaj Finserv Difference in Interest Rates Tenure Interest Rates at RBL Bank Interest Rates at Bajaj Finserv. Between one and two years, 6.50 percentage points 6.9 percentage points. Two to less than three years 6.50 percentage point. 7 percentage points From three to five years 6.20% 6.40%
The Penalty Period In Case of Early Withdrawal Is Comparatively Lower With Corporate FDs:
- According to the Reserve Bank of India guidelines, all fixed deposits should have a penalty period of at least three months. If you withdraw your invested money from a fixed deposit within the initial three months, you will have to bear a penalty.
- Beyond this period, it is up to your NBFC, Company, or Bank to decide its penalty period. Generally, the penalty period of corporates is lesser than that of banks. For instance, in the case of the State Bank of India’s fixed deposit scheme, you have to pay the penalty if you withdraw your FD anytime before it matures.
- Whereas, for most corporate fd, the penalty period in case of early withdrawal is only three months.
Now, as we know the difference between corporate fd and bank FDs, let us know the similarities between these two:
Similarities Between corporate fd rates and Bank FD:
There are some similarities as well between these two types of fixed deposits: Higher Rate of Interest for
- Senior Citizens: Same as most bank fixed deposit schemes, the corporate fixed deposit offers a little higher interest rate for senior citizens. For example, if the interest rate for an average Indian resident is 6%, then for senior citizens, it would be a little higher than this, opting for corporate fd rates.
- Guaranteed Returns: Corporate fixed deposits, like bank FDs, give guaranteed returns. For example, if you invest Rs. 1 lakh in a corporate fixed deposit and the concerned corporate or non-banking financial institution promises you a 7 per cent rate of interest, you will receive the promised rate of interest at the end of the year regardless of how the rate of interest fluctuates or the market moves. Furthermore, you will be informed of the amount that you will get as maturity only when investing. This allows you to properly plan your future financial goals.
- Flexibility in Choosing Investment Tenure: The tenure of corporate fixed deposits spans from one year to five years, and as an investor, you can choose any period within this range. As a result, if you simply want to invest for one year, you may select investment for one year, and if it is 3.5 years, you can choose the tenure appropriately. On the other hand, the rate of interest changes proportionately, with the longer the duration, the greater the rate of interest for your best corporate FD. As you learn more about the best corporate FD and the similarities and differences between them and bank FDs, let us look at which firms you should choose to open your fixed deposits with or which organizations are eligible to receive fixed deposits. It is essential to choose the best company fixed deposits.
Which Non-Banking Financial Institutions or Companies are Authorized to Accept Fixed Deposits?
When it comes to authorizing Non-Banking Financial Institutions to take fixed deposits from the general public, the Reserve Bank of India is highly cautious. An NBFC must not only be registered with the RBI, but it must also have a valid licence to receive company fd rates.
Following that, the organization must handle at least Rs. Five thousand crores in financial assets. With all of this, non-banking financial organizations must also follow specific requirements to take fixed deposits from the general public.
These are the guidelines:
- The RBI Guidelines for Fixed Deposit Launches that NBFCs Should Follow: A fixed deposit must have a minimum duration of one year and a maximum tenure of five years. The interest rate on fixed deposits shall not be higher than the rate set by the Reserve Bank of India.
- The RBI revises this interest rate regularly. The overall quantity of fixed deposits that an NBFC can collect is limited by its allowed limit, which varies amongst NBFCs. An NBFC must provide the RBI with all necessary information on fixed deposits. With the best company fd rates, you can get a good deal.
If you wish to attain a goal in one to five years, you might choose a corporate fixed deposit strategy. However, don’t forget to examine the credit rating of the organization where you’re going to put your money. It is vital to choose the best company fixed deposits.