Corporate FD or Bank FD: Bank or post office fixed deposit schemes are very popular in India. Whenever it comes to investment, FD is the priority of most people. It is also reasonable because here one investors money is safe, the other is the interest rate at which FD is locked, till maturity, there is interest. But last year, due to Coronavirus, RBI has cut interest rates drastically, while banks have also cut FD interest rates continuously. At the same time, FD rates of major banks have come down by 2.5 percent in the last 5-6 years. In such a situation, the trend of people has gone towards corporate FD. At present, corporate FDs are getting 2 to 3 percent more annual returns than banks. However, he also has some questions about corporate FDs.
What is Corporate FD
Corporate deposits are issued by the company. Interest rates incorporate FDs are offered more than bank FDs. But it is related to the business of companies, so it has more risk than the bank. For example, if the company defaults, then there is a fear of losing money. However, the risk of FD in companies with strong and high rating is less. It works in the same way as a bank FD.
The duration of maturity in corporate FD is usually from 6 months to 3 years and 5 years. Some corporate FDs are even longer. At the same time, corporate FDs are offering 8 to 8.5 percent annual returns. For example, companies like Bajaj Finance, Shriram Transport Finance are paying annual interest on FDs from 7.85% to 8.05%.
FD and interest by some companies
Mahindra Finance FD Scheme 5.70% – 6.45% 15 to 60 months
Muthoot Capital 7.75% –8.00% 1–5 years
LIC Housing Finance 5.65% –5.75% 1–5 years
Bajaj Finserv 5.94% –6.60% 12 to 60 months
HDFC Limited 5.65% –6.05% 12 to 84 months
PNB Housing 5.90% –6.70% 12 to 120 months
Srabharam Transport Finance 7.25% –8.09% 12 to 60 months
ICICI Home Finance 5.30% –6.10% 12 to 120 months
Sundaram Finance 5.75% –6.25% 12 to 36 months
KTDFC 8.00% –7.75% 1–5 years
Hawkins Cooker 10.25% –10.75% 12 to 36 months
How much interest on bank FD
Talking about big banks, the State Bank of India (SBI) is paying interest of around 5.7 per cent annually. On the other hand, HDFC Bank, Axis Bank, Bank of Baroda, PNB, Kotak Bank and ICICI Bank are paying 6% to 6.50% interest annually on FDs.
Keep these things in mind when choosing a corporate FD
If companies with AAA or AA rating are offering FD then they can be invested. That is, you must check the credit rating of the company before investing. The better the company rating, the lower the risk.
Many times, companies with lower ratings pay higher interest but security is in companies with higher renting.
In the case of corporate FD, choose the short-term scheme instead of the long-term one. Risk is reduced on short-term FDs.
Banks should invest only in FDs of the company against FDs when the difference between the two varies from 3 to 4 per cent.
Before investing in corporate FD, see the record of 10-20 years of that company. Invest in deposits of the same companies that are making profits and who are giving you dividend for 5 years.