What is a Corporate FD?
Corporate Fixed Deposits are term deposits held over fixed periods at fixed rates of interest, offered by Non-Banking Financial Companies (NBFCs) and large corporations. To attract investors, they generally offer an interest rate that is 1% to 2% higher than what traditional banks offer.
Understanding the Risks
While yields are higher, NBFC FDs carry slightly more risk than bank FDs.
- No DICGC Insurance: Unlike bank FDs which are insured up to ₹5L, Corporate FDs depend entirely on the financial health of the company.
- Credit Ratings: Always check ratings from agencies like CRISIL, ICRA, or CARE. Only invest in FDs rated 'AAA' or 'AA+', which indicates the highest degree of safety regarding timely servicing of financial obligations.
- TDS Rules: TDS is deducted at 10% if the interest income exceeds ₹5,000 in a year, unlike ₹40,000 for banks.