Corporate FD Interest Rates and Things to Know Before Investing

8 min read • Published 22 November 2022
Written by Anshul Gupta
corporate fd interest rates

An FD is an investment option that offers guaranteed returns upon maturity. Instead of parking your money in a savings bank account, investing it in a FDcould fetch you relatively higher returns. If you are looking to diversify your investment portfolio, an FD presents a safe investment option.

Apart from banks and post offices, the Reserve Bank of India (RBI) permits select non-banking financial companies (NBFCs) to provide fixed interest schemes to customers. Known as corporate deposits or company deposits, these are issued by entities such as housing finance companies and finance companies. Corporate FD interest rates are higher than the FD interest rates provided by banks and post offices.

The basic framework for a corporate FD is similar to a FD offered by a bank or post office. You need to invest a lump sum amount for a specific tenure at an interest rate that remains fixed throughout the term. Here’s a crisp rundown on corporate FD interest rates in India and the features and benefits of a corporate FD.

What is a Corporate FD?

Like regular FD schemes, corporate FDs are fixed-income instruments where your money is held for a fixed period and earns a fixed interest. One key difference is that corporate FDs are provided by NBFCs and HFCs, and corporate FD interest rates are higher than those offered by banks and post offices. The financial companies offering these fixed deposits are regularly graded by rating agencies like CARE, ICRA, and CRISIL on the basis of their creditworthiness. It is best to choose a corporate deposit that has been assigned high ratings by any or all of these agencies.

While the higher interest rates add to the appeal of a corporate FD, there is one area where they score lower than a bank FD. Unlike FD schemes by banks, corporate FDs are not insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) – a subsidiary of the RBI. 

However, NBFCs or finance companies offering FDs have to adhere to strict RBI or sometimes Ministry of Corporate Affairs guidelines. Although there are thousands of NBFCs registered with the RBI, only a select few are permitted to accept public deposits. An NBFC requires a valid licence to accept deposits.

According to RBI guidelines, the total deposits an NBFC can accept are subject to certain limits, which vary from one company to another. Moreover, the tenure of corporate FDs is in the range 1-5 years.

Like all FDs, a corporate FD can be cumulative or non-cumulative, based on how you would like to receive interest payouts. In the case of cumulative corporate FDs, your interest is compounded and paid at maturity. In the latter, the interest is paid periodically, either monthly, quarterly, bi-annually or annually, depending on your preference.

Also Read: Experience financial growth with unmatched Bajaj Finance FD Rates

Top Corporate FD Interest Rates

Here is a comparison of the corporate FD interest rates per annum provided by fNBFCs and HFCs for cumulative deposits:

Company Name1 year FD2 years FD3 years FD4 years FD5 years FDAdditional interest for senior citizens
Shriram Transport Finance Co. Ltd.7.00%7.78%8.71%9.26%9.81%0.50%
PNB Housing Finance Ltd.7.00%6.80%7.55%7.40%7.40%0.25%
Muthoot Capital Services Limited6.25%6.50%6.75%6.75%7.25%0.25%
HDFC Ltd.6.70%6.75%6.75%6.80%0.25%
Bajaj Finance Limited6.80%7.25%7.50%7.50%7.50%0.25%
ICICI Home Finance6.15%6.70%6.90%6.90%7.00%0.25%
Sundaram Home Finance6.65%7.00%7.30%7.55%7.65%0.35%

Note: Interest rates are subject to periodic changes

Features of a Corporate FD

  • Credit ratings can help you choose safe corporate FD schemes to invest in. Credit rating agencies assign ratings such as AAA, AA+, A and BBB based on several parameters. High ratings indicate lower risk of defaults in repayment of the principal and interest amounts. It would be safe to invest in NBFCs or housing finance companies (HFCs) marked ‘stable’.
  • Corporate FD rates are higher than those offered by banks and post offices.
  • A premature withdrawal facility is available with corporate FDs, and lock-in periods are shorter (three months, in some cases) than that of banks and post offices. So, if you need money urgently, you can withdraw before the maturity date easily.
  • Corporate FDs provide the facility of interest payment at regular intervals. You can avail of monthly, quarterly, half-yearly or yearly interest payment options to generate regular income.

Benefits of a Corporate FD

  • In a corporate FD scheme, the returns are guaranteed as per the predetermined interest rate.
  • Senior citizens can avail of higher interest rates in corporate FDs compared to regular investors. Most NBFCs provide 0.25%-0.50% higher interest rates to senior citizens.
  • You have the flexibility to choose a tenure from one to five years based on your financial goals.
  • You can utilise your investment in corporate FDs as collateral for availing of loans. The loan amount depends upon the invested amount and varies across financial institutions.
  • You can withdraw your investment prematurely. After the lock-in period, which is usually three months, you can withdraw your investment at a 1-2% lower interest rate than the predetermined interest rate.

Documents Required

Following is the list of documents you need to submit to open a corporate FD account, along with the filled application form.

Documents required for individual investors:

  • PAN card
  • Aadhaar card
  • Photographs

Documents required for a company:

  • PAN card of the company
  • Memorandum and articles of association
  • Certificate of incorporation
  • Board resolution from the directors or power of attorney
  • Know Your Customer (KYC) details of the authorised signatory

Documents required for partnership firms:

  • Registration certificate
  • List of authorised signatories
  • Partnership deed
  • Identity proof and address proof of the authorised signatories

Documents required for trusts and foundations:

  • Registration certificate
  • List of authorised signatories
  • Trust deed
  • Identity proof and address proof of the authorised signatories

Who should invest in a Corporate FD?

If you have a lump sum amount parked in your savings account and are looking for safe investment options, you could invest in a corporate FD. You can avail higher interest amount upon maturity than what you would from a savings bank account. However, the higher interest rate comes with incremental risk. Hence, it is important to carefully pick a safe corporate FD scheme as you build an investment portfolio. A corporate FD is a good option if you have an important financial goal to achieve, such as if you are saving money for the higher education of your child in the US or Germany, where the tuition fees are significantly higher.

Advice for investors

While corporate FD interest rates are attractive, you must compare the credit ratings and the financial institution’s history of repayments before investing in a corporate FD scheme. Look out for financial companies marked ‘stable’ with high ratings by credit rating agencies such as CRISIL and ICRA. This will ensure the safety of your investment and guaranteed returns as per the predetermined interest rates. Before opting for a corporate FD, you must read the terms and conditions for availing loans and seeking premature withdrawal.

FAQs

Who can open a corporate FD account?

A corporate FD account can be opened by:

Indian residents above the age of 18 years
Non-resident Indians (NRI)
Senior citizens (people above the age of 60 years)
Minors (below the age of 18 years through parents or guardians)
Corporate organisations
Trusts, foundations, and partnership firms

What are the income tax implications of investing in a corporate FD?

Interest earned on a corporate FD is taxable under the Income Tax Act, 1961. If the interest earned exceeds ₹ 5,000 in a financial year (different thresholds apply for bank and post office FDs), tax is deducted at the rate of 10%. Resident citizens and senior citizens whose income is below ₹ 2,50,000 and ₹ 5,00,000 respectively, can submit Form 15G/Form 15H to avail an exemption from paying tax. The principal amount of a corporate FD is not eligible for tax deduction under section 80C. If you want to opt for tax-saving FDs, you should explore FD schemes provided by banks and post offices.

Why should I choose corporate FD over bank FD?

The big differentiating factor between corporate FD and bank FD is the interest rate. Corporate FD interest rates are higher than those of banks. If you have a lump sum amount at hand, you can choose corporate FD to avail higher returns.

Are investments in corporate FDs safe?

Bank FDs up to ₹ 5 lakh are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) and regulated by the RBI. However, corporate FDs are not insured, which means you could lose money if the NBFC or HFC in which you invested your money defaults or goes bankrupt. However, financial companies offering corporate FD schemes are regularly graded by rating agencies like CARE, ICRA and CRISIL. Hence, you should choose a corporate deposit accredited with high ratings for safe and guaranteed returns.

What should I check before investing in a corporate FD scheme?

Before investing in a corporate FD scheme, you should:

Check the credit ratings provided by agencies such as CRISIL and CARE. The higher the ratings, the safer the scheme is for investment.
Evaluate the repayment history of the financial company.
Compare interest rates offered by different financial companies.

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Anshul Gupta

Co-Founder
IIT Roorkee Alumnus and CFA with experience of structuring debt products worth more than 15000Cr for institutional and retail investors.

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