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Corporate Fixed Deposit Has Higher Risk Factor Than Banks; Know Interests Offered

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Last Updated: January 09, 2023, 14:34 IST

A company with a higher AAA rating has less chance of defaulting on interest and loan repayments.

A company with a higher AAA rating has less chance of defaulting on interest and loan repayments.

Corporate or company FD is a fixed deposit that is issued by a finance company, housing finance company or other types of NBFCs.

Fixed deposit accounts in banks have been a traditional form of investment for people and most people are aware of the rules and regulations as well as the interest rates offered by banks on FD. However, not many are aware of the company or corporate FD. The Deposit Insurance and Credit Guarantee Corporation (DICGC) covers bank fixed deposits up to Rs 5 lakh, but not corporate fixed deposits, increasing their risk factor.

Corporate or company FD is a fixed deposit that is issued by a finance company, housing finance company or other types of NBFCs (Non-Banking Financial Companies). But there is no credit guarantee in these. Hence, before investing money in a company or corporate FD, investors should check the credit rating of these company fixed deposits to determine the legitimacy of the institution.

A company with a higher AAA rating has less chance of defaulting on interest and loan repayments. When it comes to FDs with AAA-rated companies, Bajaj Finance Fixed Deposit is rated CRISIL AAA/Stable and [ICRA] AAA (Stable) and the company now offers 7.05% for tenures ranging from 12 months to 60 months.

As per Mint news, ICICI HFC Fixed Deposit is rated AAA/Stable by CRISIL, AAA/Stable by ICRA and AAA/Stable by CARE. The interest of 7.00% to 7.50% is available on this FD for a period of 12 to 120 months. HDFC Limited has received AAA ratings on FDs from both CRISIL and ICRA for 28 consecutive years. HDFC Company FD interest rates range from 6.85% to 7.20% for tenures of 12 to 120 months.

Mahindra Finance Fixed Deposit offers an interest rate of 6.75% to 7.50% and is rated “IND AAA / Stable”. CRISIL has assigned AAA/Stable rating to LIC HFL FD, and the firm offers interest ranging from 6.75% to 7.50% for tenures ranging from 1 to 5 years.

For the past 30 years, Sundaram Finance Fixed Deposit has maintained a stable AAA rating and offers interest rates ranging from 7.20% to 7.50%.

Corporate FD is not very beneficial in terms of saving tax because the profit from corporate FD is taxable under the tax slab. In case of premature withdrawal, factors like lock-in period, penalty and loss of interest are also involved.

Therefore, corporate FDs can be suitable for investors, who do not have cash requirements in case of emergencies and want to invest for a short tenure of 1-3 years.

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