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All you need to know about Corporate fixed deposits

ICICI Securities 22 Feb 2021 0 COMMENT

As an investor, you can choose from a wide range of investment products. Fixed deposit (FD) has remained the most popular choice for us Indians. An FD makes your money work hard for you and brings fixed returns after the investment period. And here’s an upgrade for you: when you choose corporate fixed deposits, you get to earn even more interest! 

What is a fixed deposit?

A fixed deposit is an investment scheme offered by banks and NBFCs. Under this scheme, your investment is locked in for a certain period at a fixed interest rate. Fixed deposits come with greater returns on the principal invested than the returns generated from the savings account.

What is a corporate fixed deposit?

Similar to banks, some companies and NBFCs offer fixed deposit schemes. Such deposits are known as corporate fixed deposits or company FDs. Like banks, these companies offer fixed returns and a flexible tenure in keeping with your convenience. They also provide higher interest rates than traditional banks.

Advantages of corporate fixed deposits

  • Corporate FDs offer higher interest rates and thus higher returns than traditional banks at the end of the deposit tenure.
  • Corporate FDs have flexible tenure and offer interest payment options.
  • Senior citizens can enjoy additional interest rates.
  • You can avail loans against your corporate FD.

Why would you go for a corporate fixed deposit?

Many are turning to corporate fixed deposits these days to earn higher returns. Corporate FDs are appropriate for people seeking regular income. For instance, senior citizens can benefit very much from the higher interest rates on such fixed deposits.

Some planners favour corporate FDs as an essential aspect of the investment portfolios of their clients. They usually recommend that at least half of your debt portfolio should be into corporate FDs.

With overall market volatility nowadays, investing in a corporate FD can bring you assured returns and ensure your capital's steady growth.

Interest from corporate FDs is taxable

You must pay tax on the interest from a corporate FD at your tax slab. In India, a company deducts TDS on the corporate FD interest at 7.5 per cent if it exceeds Rs 5,000. That is typical of any investment you may make in the market. However, there would not be any TDS deduction if Form 15G is submitted by individuals and Form 15H by senior citizens.

Can you book corporate FDs Online?

Nowadays, you can invest in most corporate FDs from your home through an end-to-end online investment process. This process is entirely paperless and hence saves you both time and other hassles. Booking an online FD becomes even simpler if you have an account with ICICIdirect.com.

The unique features of investing through ICICI Direct are:

  • Ease of application: The application process is very simple and can be finished in only a few clicks from home comforts.
  • No charges: You don’t have to pay any charges for putting your money in corporate FDs.
  • Highest safety standards: Here you have the option to invest in AAA-rated corporate FDs, which provide the highest safety for your investment.

Is it risky to invest in corporate FDs?

All companies that can offer fixed deposits have to abide by strict rules and regulations laid down by the Reserve Bank of India or the Ministry of Corporate Affairs (MCA). Only some NBFCs in India are eligible to collect deposits from retail investors. Hence, there is a minimum risk for investors when it comes to investing in company fixed deposits.

However, it must be noted that Corporate FDs fall outside the purview of Deposit Insurance and Credit Guarantee Corporation (DICGC). DICGC insures each of all types of bank deposits for up to Rs 5000,000. These banks deposits include saving, fixed, current, and recurring deposits.

Rating agencies assistance

Rating agencies like CRISIL and ICRA assess companies that offer fixed deposits to the public. These agencies analyse the company's performance and its history of adhering to the regulations set by the RBI and the MCA.

Depending on the companies’ performance, they are assigned ratings like AAA, AA, and BBB. Only companies with at least a BBB rating are allowed to collect deposits from retail investors. Here AAA is the highest rating, which indicates higher safety and timely fulfilment of financial obligations. So, it’s advisable to put your hard-earned money in companies with the highest rating. It should be noted that ICICIdirect.com offers only AAA-rated corporate FDs.

Bottom-line

A corporate fixed deposit gives you double protection: it assures a fixed income and offers higher interests than the ones provided by banks. A wise investment in this type of fixed deposit usually brings higher rewards than traditional deposits at the end of the investment tenure. Choose wisely and earn high returns from a corporate FD.

Article is fine. Below given disclaimer to be appended. No exchange approval would be required.

ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Centre, H. T. Parekh Marg, Churchgate, Mumbai - 400020, India, Tel No : 022 - 2288 2460, 022 - 2288 2470. I-Sec acts as a distributor for Corporate Fixed Deposits. Corporate Fixed Deposits are not exchange traded product / service and ICICI Securities Ltd. is just acting as a corporate agent and all disputes with respect to the corporate agency activity would not have access to Exchange investor redressal or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest.  I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon.