Corporate Fixed
Deposits
As an investor, we always expect the steady returns and investment safety. Corporate fixed deposit is an investment avenue that delivers fixed return, decent security at the minimum risk.
Corporate or company fixed deposit is the same as Bank FDs. Fixed deposit with a bank is usually the first step when saver decides to consciously start investing his surplus. Corporate Fixed Deposit is designed almost on a similar basis. It aims to have a higher yield as compared to bank FD.
CFD is issued by finance companies, housing financing firms, and other Non-banking finance companies (NBFCs). They issue the CFD with different interest rates and for different tenure/periods.It is an excellent choice of investment for the senior citizens who expect better returns than the bank fixed deposits. An investor can invest in the CFD with the companies for the fixed tenure at the fixed interest rate.
A corporate fixed deposit means the company borrowing unsecured loans from the investor.
Types of Corporate Fixed Deposits
Under CFD there are two types of fixed deposits scheme available:
- Cumulative CFD- In this type of FD, interest is stock-piled with the principal investment and then the complete amount is paid to the investor at the end of the tenure. No interest is paid to the investor during the investment period.
- Non-cumulative CFD- Here, the interest is paid to the investor in regular intervals- monthly, quarterly, half-yearly, or annually, depending on the investor’s choice.
Why should you invest in CFD?
Following are the key features of the corporate fixed deposit, helping you to understand the product with a better perspective :
- Corporate fixed deposits offer fixed tenure and fixed rate of returns.
- How long to stay invested in CFD is the investor’s decision. They can choose to stay invested in the corporate fixed deposit either for a few months or years.
- Early exit (premature withdrawal) from the CFD is allowed*.
- CFD offering companies are rated by CRISIL and ICRA rating agencies.
- Corporate fixed deposits are administered by the Companies Act 1956 u/s 58-A.
Who should invest in CFD?
- Investors who desire stable returns with no or less risk.
- Senior citizens can earn the benefit of regular income by investing in corporate FDs with additional / special rate.
Difference between company FDs and Bank FDs
| Company Fixed Deposit | Bank Fixed Deposit | |
|---|---|---|
| It is issued by | Finance companies & NBFCs | Banks |
| It is regulated under | Companies Act 1956 | Banking Regulation Act, 1949. |
| Insured investment up to | ₹10,000 | ₹1,00,000 |
| Offered interest on | Higher than bank FDs | Lower than CFDs |
| Minimum tenure to invest | 6 months (Half-yearly) | 7 days (week) |
Some of the Companies currently accepting Fixed Deposits
Things to remember before investing in corporate FD
- In the case of the CFD minor investor, the form has to be signed by the immediate guardian.
- If the deposit holder is deceased, the proceeds will be credited to their account by the company on issuing the death certificate to them.
- FDs are accepted by the cheque payment. In case any company asks for the cash payment, please confirm the same with the company’s management.
- The FD receipts are non-transferrable.
