Bank FD vs Corporate FD- Want to invest on something which is profitable? Then this article is made for you. Whenever the talk of fixed deposit starts, people turn to banks. Just like banks, there is also Corporate FD. Corporate FD or Company FD is also known as Company Term Deposit. This is a fixed deposit scheme.
In this, interest is slightly higher than bank FD. Generally, non-banking finance companies offer corporate FD. However, there is also risk in this as compared to bank FD. The reason for this is that this is a scheme offered by private companies. Many investors face a dilemma while choosing between corporate FDs and bank FDs. Although both serve the purpose of growing your savings, it is important to know some important differences between these two FDs before making a decision.
What is Corporate FD?
Just like bank FDs are made in banks, corporate FDs are provided by corporate companies. These FDs are provided by non-banking financial institutions. Corporate FDs are similar to bank FDs, but the interest rates in corporate FDs are higher than bank FDs. Companies launch FDs to raise funds. The interest rates on these can be 1 to 1.50 percent higher than bank FDs . The valuation of their fixed deposit schemes is done by many rating agencies including ICRA, CARE and CRISIL. They give ratings on that basis. In these too, investment options are available for different tenures.
Why are there doubts over corporate FDs?
Corporate FDs are not insured . Hence the risk increases even more. The option of investing in corporate FDs with good credit rating from reputed credit rating agencies can be considered safe to a great extent. In this way, bank FDs give low returns with low risk and corporate FDs give high returns with high risk.
Which is better corporate or bank FD?
If you can take risk to get higher returns, then you can invest your money in corporate FD. However, before investing in corporate FD, it is very important to check the financial condition and reputation of the company. Apart from this, if you want safe investment, then you can invest your money in bank FD.
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