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Corporate Fixed Deposits Interest Rates 2023

Updated on: 29 Dec 2023 | 10 mins read

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 an FD could 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 an 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?

A corporate FD is a fixed-income investment offered by NBFCs (Non-Banking Finance Companies) and HFCs (Housing Finance Companies), delivering higher interest rates over traditional bank FDs without DICGC insurance, with tenures of 1-5 years. These instruments are subject to stringent RBI or Ministry of Corporate Affairs guidelines and are only offered by licensed firms within set deposit limits.

Credit ratings by agencies like CARE, ICRA, and CRISIL gauge their creditworthiness, recommending a preference for highly-rated options. Corporate FDs can be cumulative, where interest is compounded to payout at maturity, or non-cumulative, offering periodic interest payouts.

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 Name

1 year FD

2 years FD

3 years FD

4 years FD

5 years FD

Additional interest for senior citizens

Unity Small Finance Bank

7.35%

7.40%

7.65%

7.65%

7.65%

-

Fincare Small Finance Bank

7.65%

8.11%

8.11%

7.50%

8.00%

-

Manipal Housing Finance Syndicate Ltd

8.25%

8.25%

8.25%

7.75%

7.75%

0.25%

Shriram Finance

7.67%

8.00%

8.23%

8.27%

8.27%

0.50%

PNB Housing Finance Ltd.

7.35%

7.70%

7.50%

0.25%

Muthoot Capital Services Limited

7.21%

8.07%

8.38%

0.25%

Sundaram Finance

7.45%

7.75%

0.50%

Note: Interest rates are subject to periodic changes

Features of a Corporate FD

Now that we’ve taken a tabular look at the interest rates of the top corporate FDs let’s take a look at their features a little bit more in-depth:

 

Features of Unity Small Finance Bank FD

  • Unity Small Finance Bank FD offers interest rates ranging from 7.35% to 7.65% for tenure options between 1 to 5 years. They also provide an additional interest rate for senior citizens. You can choose from tenures as 7 days or as long as 10 years.
  • The Reserve Bank of India recognises scheduled banks, which are then covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC), which provides deposit insurance to the account holders.


Features of Fincare Small Finance Bank FD

  • Fincare Small Finance Bank FD provides interest rates ranging from 7.65% to 8.11% for tenure options between 1 and 5 years, with a rate of 8.61% for 750 days.
  • Like Unity Bank, Fincare offers an interest rate for citizens and provides tenure options within the same range.

 

Features of Manipal Housing Finance Syndicate Ltd FD

  • Manipal Housing Finance Syndicate Ltd FD offers interest rates of 8.25% for tenures between 1 to 3 years.
  • At a slightly lower rate of 7.75% for tenures between four and five years. Like the other banks mentioned, they also offer an interest rate for citizens and have been accredited with the credit rating ACUITE A, indicating a high level of safety.

 

Features of Shriram Finance FD
Shriram Finance FD provides interest rates ranging from 7.67% to 8.27%, covering tenure options from one to five years. Senior citizens can benefit from an interest rate offered by Shriram Finance, while their high credit ratings ICRA AA+/Stable and IND AA+/Stable add confidence.

 

Features of PNB Housing Finance FD

  • PNB Housing Finance FD presents a range of interest rates starting at around seven per cent, up to seven point eight five per cent across tenures varying from one year through five years.
  • Reputed and a staple in the Indian investment sphere, PNB’s financial products have been top-notch regarding safety and constant returns.

 

Features of Sundaram Finance FD

  • The interest rate for 1 year is 7.45%. For 3 years, it is 7.75%. Senior citizens can enjoy an additional interest rate.
  • CRISIL and CARE have given a credit rating of AA/Stable, indicating trustworthiness in meeting obligations.

 

Features of Muthoot Capital Services Limited FD

  • The interest rates vary, with 1 year yielding 7.21%, 3 years offering 8.07% and 5 years providing an interest rate of 8.38%. Senior citizens can also benefit from an additional interest rate.
  • Muthoot Capital Services has been rated by CRISIL as A+/Stable, which ensures safety when it comes to fulfilling commitments.

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.

Eligibility Criteria

Here are the following, that are eligible to invest in a corporate FD:

  • Individuals
  • Resident Indians
  • Hindu Undivided Families (HUF)
  • Group companies
  • Partnership firms
  • Corporate entities
  • Clubs
  • Educational institutions
  • Cooperative societies
  • Societies
  • Associations

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
     

Bond Ratings Explained: CRISIL, ICRA & CARE

CRISIL, ICRA, and CARE are trusted agencies that rate how safe it is to invest in companies. Their ratings help you understand if your investment is likely safe and if you'll get your money back. CRISIL uses terms like 'FAAA' for the safest investments and goes down to 'FD' if a company is likely not to pay back. ICRA's ratings do the same, starting at 'AAA' for the safest bets and going to 'D' for those who aren't likely to pay. These ratings are like a guide, helping you choose where to put your money wisely.

Here’s a simple rating table to help you better understand the ratings and what they mean:

 

CRISIL Rating Scale

Rating CategoryMeaning
FAAAHighest Safety/Most Stable
FAAHigh safety
FAAdequate safety
FBInadequate safety
FCHigh risk
FDDefault
NMNot Meaningful

 

ICRA Rating Scale

Rating CategoryMeaning
AAAHighest safety/Lowest credit risk
AAHigh safety/Very low credit risk
AAdequate safety/low credit risk
BBBModerate safety
BBModerate risk of default
BHigh risk of default
CVery high risk of default
DDefaulted or expected to be in default

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.

Concluding Thoughts

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.

What are the tax implications of the interest earned on the fixed deposit?

The interest earned on a corporate fixed deposit is taxable at the slab rate applicable to the assessee, provided the returns exceed ₹5,000 in a year​​.

What are the different payment options for company fixed deposits?

Corporate FDs offer two options: cumulative and non-cumulative. The cumulative option pays interest at maturity, while the non-cumulative option allows periodic interest payouts.

What is the minimum tenure of a company fixed deposit?

The minimum tenure for a company fixed deposit is more than 12 months, though it varies between companies​​.

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