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Corporate FD vs. Bank FD

Fixed Deposits are one of the most safe investments available, as they provide guaranteed returns with no risk. Corporates, in addition to banks, offer fixed deposits, which are usually for a shorter period of time. 

Corporate FD vs. Bank FD

Fixed Deposits (FDs) are savings accounts that pay a higher rate of interest than conventional savings accounts. It is a form of term deposit in which the investor deposits a big sum of money and receives interest at regular intervals until the maturity date. FDs are one-time investments, and the investor is not required to make monthly deposits.

Meaning of a Bank FD

Banks offer a variety of fixed deposit investment alternatives to fulfill the demands of both short-term and long-term investors. Fixed deposits also come with a slew of advantages. The best thing about fixed deposits is that you know you'll earn a guaranteed return on your money. Furthermore, putting money into a fixed deposit is tax-free. Fixed deposits, in addition to being tax-free, offer investors freedom by allowing them to choose the FD's investment duration and amount. 

You may be qualified for a loan on your FD based on your investment. You can close your Fixed Deposit and withdraw the funds immediately in the event of an emergency.

Meaning of a Corporate FD

Several companies/corporates and NBFCs, like banks, collect and deposit money for a set period of time and pay interest. Corporate fixed deposits are the fixed deposits of firms and NBFCs. Corporate FDs, like other banks, pay a rate of interest on income and have the same variable duration to choose the amount. When compared to bank FDs, corporate FDs always deliver a better rate of return.

The distinction between an FD vs. Bank FD

The table below can show you the differences between the two types of investments:

Particulars

Bank Fixed Deposit

Corporate Fixed Deposit

1) Returns of the Schemes:

The most crucial consideration while making any type of investment is the expected return; this consideration also applies to fixed deposits in the form of the rate of interest. In contrast to corporate fixed deposits, banks give an average rate of interest.

If you invest in corporate fixed deposits rather than bank fixed deposits, you can expect a higher and guaranteed interest rate over time. Another advantage of corporate fixed deposits is that they typically provide both cumulative and non-cumulative interest-based payouts. Interest is reinvested in cumulative interest payouts, resulting in higher payouts and compounding returns.

2) Tenure of the Investment:

The term period of a bank fixed deposit ranges from months to years, which is significantly longer than that of a corporate fixed deposit. If you wish to invest in fixed deposits for a longer period of time, which is up to 10 years, bank fixed deposits are preferable to corporate fixed deposits.

The tenure length is a significant component in determining how long an investment will get returns until maturity. The term period of a corporate fixed deposit is at most six months to five years.

3) Premature Withdrawal of the Funds

Premature withdrawals incur a 1-2% interest charge from the bank.

Not all companies allow you to withdraw your money before the three-to-six-month mark from the investment date. If a company withdraws from an offer before it is completed, no interest is paid on the deposit. Certain companies charge a penalty of 2% to 3% if you withdraw after six to twelve months.

 

Access to fixed deposits
of various banks
Invest without opening
a new bank account
Avail high interest rates
of up to 6.5%
OPEN FD ONLINE

Advantages of Investing in a Fixed Deposit

A fixed deposit is an ideal investment for investors with a low-risk tolerance who want to grow their money as safely as possible. Although there are numerous advantages of having an FD, here are a few of them:

  • You can cover your immediate financial obligations with features like loans against fixed deposits.
  • It can assist you in generating higher income than a savings account.
  • Returns on fixed deposits can be used for a variety of things, including financing a vacation or funding your child's schooling.
  • Market fluctuations have no effect on your investment.
  • Senior citizens can benefit from rising interest rates while avoiding market dangers.

Advantages of Investing in a Corporate FD

Here are the benefits of investing in the corporate fixed deposit:

  • The deposit's duration can be chosen.
  • The danger is minimal.
  • When compared to normal FDs, higher interest rates are available.
  • The scheme is offered by financial institutions and businesses.
  • CRISIL and ICRA are two credit rating companies that provide safety ratings.
  • There are both cumulative and non-cumulative interest-payout options available.
  • You are free to spend the money whatever you like.
  • Premature withdrawals may be made available without restriction.

Comparison of FD rates

Name
Tenure
Highest Interest Rates
1
2
3
4
5

FAQs

Q1. What are corporate fixed deposits, and how do they work?

Corporates receive money from customers in the form of Fixed Deposits, which guarantee fixed returns for a set period of time.

Q2. How do you purchase a company's FDs?

You can buy fixed deposits from the company's brokers if you want to invest in them. These are verified and receive commissions for assisting in the purchase of the company's fixed deposit.

Q3. Is the interest rate offered by banks and corporations for fixed deposits the same?

No. The interest rate for corporate fixed deposits is significantly higher.

Q4. Would I be able to take a loan amount against a bank's fixed deposit?

Yes, loans against bank fixed deposits can be obtained without difficulty.

Q5. Is it possible for NRIs to invest in corporate fixed deposits?

NRIs can invest in fixed deposits at some corporate entities.

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