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Bank Fixed Deposits and Corporate Fixed Deposits: Major Advantages and Differences

RBL Bank Nov 29, 2022

First Things First – What is a Fixed Deposit?

A fixed deposit (FD) is a monetary investment concept that banks and non-banking financial institutions (NBFCs) use to aid their clients’ money-saving abilities. Fixed Deposit accounts are more payable than other types of investments because they have a predetermined interest rate and can be paid back over a specific period, generally ranging up to 5 years.

Fixed Deposits can be of different types. From Regular Fixed Deposits to Senior Citizen Fixed Deposits, fixed deposits can be chosen based on one’s need and interest choice. However, in this article, we will be mainly focusing on two specific types of FDs

  • Corporate Fixed Deposits
  • Bank Fixed Deposits

Particulars

Bank FD

Corporate FD

Offered by

Bank

Corporate Company

Rate of interest

Average

High

Tenure period

7 days to 20 years

6 months to 3 years

Risk involved

Low

High

Medium of investment

Certificate of Deposit

Certificate of Deposit

 

What is a Bank Fixed Deposit?

A bank fixed deposit is a safe debt instrument that commonly attracts risk-averse investors because it guarantees safe returns over the long term. They are simple to acquire, and attracting so many households play a vital role in helping developers finance ambitious new projects.

As per data released by the Reserve Bank of India, Indians held more than 46 trillion rupees in fixed deposits at banks as individual assets in the 2020 fiscal year.

The significant advantages of Bank Fixed Deposits can be summed up in the following:

  • Market fluctuations do not hamper the deposited amount. The principal amount remains the same without the possibility of a loss.
  • NBFC customers attract high rates of interest on Fixed Deposits. More than banks, people are now more prone to investing their money into non–banking financial institutions.
  • FDs offer the opportunity of renewal upon maturity. The investor can further invest the accumulated sum and renew it as a new Fixed deposit for a new tenure.
  • Tax savings FDs and special consideration for Senior Citizens are commonplace in bank fixed deposits.
  • Periodic Payouts per one’s monetary requirement are one of the most significant advantages of bank fixed deposits.

Now let us move on to the aspect of Corporate Fixed Deposits:

What are Corporate Fixed Deposits?

Companies can offer fixed deposits to investors for a defined period and rate of interest, just the same as FDs provided by the banks. Non-banking financial firms (NBFCs) and other businesses provide clients with corporate FDs with guaranteed returns and a wide range of tenure options.

An increased amount of financial literacy will tell investors that corporate fixed deposits have more significant advantages associated with them.

  • Corporate Fixed Deposits offer rates of interest higher than bank fixed deposits.
  • Companies can offer fixed deposits to investors for a defined period and rate of interest, just the same as FDs provided by the banks.
  • Non-banking financial firms (NBFCs) and other businesses provide clients with corporate FDs providing guaranteed returns and a wide range of tenure options.
  • You can accept both cumulative and non-cumulative interest distributions with corporate FDs.
  • These FDs might also let investors withdraw money ahead of schedule without limitations.
  • Corporate FDs can typically be liquidated according to the terms of the institution that issued them.
  • Investors that have corporate fixed deposits are eligible to borrow up to 75% of the deposit amount.

Bank FDs vs Corporate FDs: A Comparison

From the perspective of a traditional investor, bank fixed deposits may seem like the safest of all choices. But with the changing financial environment of the country, both potential and established investors are not shying away from inching towards corporate financial institutions.

Corporate Fixed Deposits come with a wide range of advantages – most importantly, the high rates of interest! Now it is time to find out which one is more beneficial.

Verdict

The interest rates on corporate fixed deposits tend to be higher than those on bank FDs. One of the most attractive features of Corporate FDs is its flexibility. It attracts customers mainly because of its high rate of interest and also because it does not levy a penalty on those who withdraw prematurely.

With these two very flexible and easy offers, Corporate Fixed Deposits must be given a try. In order to improve one’s wealth, it is important to give up and coming financial trends. In this regard, Corporate Fixed deposits is an avenue that must be explored.

However, a word of Caution! – Do not fall prey to institutes which offer exorbitantly high amounts of interest. Conduct a thorough background research (including - CRA, CARE, CRISIL ratings) before investing your hard-earned money.

FAQ

1. Is Bank Fixed Deposits And Corporate Fixed Deposits Interest Rate Same?

No, bank FD rates are less compared to corporate FD. Because corporate FD isn’t affected by market conditions.

2. Which is the Best Corporate Fixed Deposit?

A best Corporate FD is one that provides high-interest rates, uninterrupted repayment, etc.

3. Are There Any Risks Involved in Corporate Fixed Deposits?

Corporate bonds are risk-free as it doesn’t get impacted by market fluctuations.

4. Is TDS Deducted On The Interest From Corporate Fixed Deposits?

Yes, TDS are deducted on your interest earned from the corporate FDs.

Disclaimer: Articles published on the website are merely indicative and suggestive in nature and do not amount to solicitation. The contents do not guarantee the desired returns and/or results. Reader is advised to exercise discretion and consult independent advisors for achieving desired result. Visitors to this blog/ website w.r.t products & services offered by RBL Bank Limited herein, shall ensure that the comments / feedback posted shall be restricted to the contents published herein and shall not contain such language that may be un-parliamentary or against any religion, caste, section of society, political view etc. While our endeavor is to publish the comments that are submitted, however, all comments/feedback shall be subject to internal review by RBL Bank Limited. We do not guarantee that the comments that are submitted will be published.

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