The deposit placed by investors with companies for a fixed term carrying a prescribed rate of interest is called Company Fixed Deposit. Financial institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits.
Corporate fixed deposits are fixed deposits offered by corporate companies. The corporate fixed deposits work like the regular bank fixed deposits albeit a few changes. Corporate fixed deposits offer a higher rate of interest when compared to bank fixed deposits as the risk involved is higher when it comes to corporate fixed deposits.Applying for a corporate fixed deposit is no different from applying for a bank fixed deposit. The only difference here being that one should avail the application form either from the company’s official website or at the company itself.
You get a higher rate of interest than a fixed deposit. In times of inflation, you get higher returns, than other fixed income securities.
An investment in corporate fixed deposits of high rating, is relatively safe. Higher the rating, more is its safety.
Senior citizens get a higher rate of interest than a younger person. NRI's can also invest in corporate fixed deposits.
If you invest in corporate fixed deposits of reputed banks, you have a higher degree of safety than private Companies.
• Check Interest Rates Offered: For obvious reasons, this should be the first step you take because if you don’t then some day you might realise that a company you ignored offers you better interest rates than the current one.
• Check the Minimum and Maximum Amounts: Since most of the companies define what the minimum and maximum amount that can be put in an FD is, it is best to check it. In case you wish to start an FD with Rs. 25,000 but the company you choose allow a minimum of Rs. 50,000 then you will be in a soup.
• Check Credit Rating: All fixed deposits offered by the various companies come with a credit rating issued by institutions like CRISIL. These ratings will help you determine if you should invest with them or not.
It indicates the underlying risk of the company. Hence it is better to opt for highly rated FDs.
It can be assessed through its financials and the viability of its business.
Companies with a better repayment history are a safer bet for investors.