Corporate Fixed Deposits

Corporate Fixed Deposits are one of the money-raising tools for Companies. Through these, Companies raise money from the public and offer a fixed rate of interest for different tenures. We Offer AAA+/AAA. Company Fixed Deposit is one of the most preferred investment options as it offers guaranteed fixed return on investments. Find a wide range of corporate fixed deposits & their interest rates, credit. How to choose a good Corporate Fixed Deposit scheme? Ignore the unrated Company Deposit Schemes. Ignore deposit schemes of little known manufacturing companies. Within a given rating grade, choose the company with a better reputation. Once you decide on a company. Get all the details on Company Fixed Deposits in India, List of Companies for Fixed.

Important Notice: With effect from 1 April 2021, the Terms & Conditions Governing Accounts & Services (Non-Individual Customers) will be revised with updates to Clause 11. For details on the revised clause, please refer to Terms & Conditions Governing Accounts & Services (effective from 1 April 2021).

Disclaimer

* At prevailing interest rate at time of renewal

** The effective earnings on your fixed deposits are subject to foreign exchange fluctuations

Deposit Insurance Scheme

Singapore dollar deposits of non-bank depositors and monies and deposits denominated in Singapore dollars under the Supplementary Retirement Scheme are insured by the Singapore Deposit Insurance Corporation, for up to S$75,000 in aggregate per depositor per Scheme member by law. Foreign currency deposits, dual currency investments, structured deposits and other investment products are not insured.

Please refer to UOB Insured Deposit Register for a list of UOB accounts / products that are covered under the Scheme.

For more information on the Deposit Insurance Scheme, please click here.

In India, Fixed Deposits have always been the favourite type of investment. From saving for a trip to saving for retirement, they have been the all-purpose solution.

Now, despite all the favoritism, Fixed Deposits are not the right fit for long term goals. But, if the goal is for a short term or a goal that can’t wait, FDs can be a good option in such cases. And, that is simply because it comes with the assurance of a guaranteed return.

However, if you are worried about falling interest rates of bank Fixed Deposits, you have an option of corporate Fixed Deposits.

In this blog, we will elaborate on what is a corporate FD, its similarities with bank FDs and its advantages. We will also talk about the risks involved with corporate FDs.

First, let’s understand what a corporate Fixed Deposit is

Like banks, several companies and NBFCs are also allowed to collect deposits for a fixed tenure at a prescribed interest rate. Such deposits are called corporate Fixed Deposits. Similar to banks they come with the assurance of guaranteed returns and flexibility of choosing the tenure. Plus, corporate FDs provide a higher interest rate than bank FDs.

Now let’s look at the similarities corporate FDs have with bank Fixed Deposits:

Number 1: Corporate Fixed Deposits provide a guaranteed return

One of the biggest advantages of investing in corporate Fixed Deposits is, like bank Fixed Deposits they also provide the assurance of a guaranteed return. Say you have invested Rs 1 lakh in a corporate Fixed Deposits and the concerned NBFC/corporate promises you to pay a 7 percent interest per annum. Then, no matter how the markets move or how the interest rates fluctuate, at the end of the year, you will receive Rs 1.07 lakh as promised.

Plus, at the time of investment itself, you get to know the exact amount that you will receive at maturity. This one big advantage helps you make your future financial plans more confidently.

Number 2: Higher rates for senior citizens

Like most bank deposits, most corporate Fixed Deposits offer a little higher interest rate for senior citizens. For example, if a non-senior citizen earns a 6 percent return from a corporate Fixed Deposit, usually a senior citizen will get a 6+ percent on the same investment.

For senior citizens who are retired and depend on Fixed Deposit returns for income, this is an added advantage.

Number 3: Flexibility of choosing the tenure:

The tenure of a corporate Fixed Deposit usually ranges between one to five years. And you have the flexibility to choose any duration within that range. So if your goal is one year away, you can invest for one year; if it’s 2.5 years away, you can choose your tenure accordingly. However, the interest rate will vary accordingly, i.e. higher the tenure, the higher is the interest rate.

Now that we have looked at the similarities between corporate Fixed Deposits and bank FDs, let’s look at the advantages it has over bank Fixed Deposits.

Here are the 2 advantages of corporate Fixed Deposits over bank Fixed Deposits

#1: Interest rates for corporate FDs are higher than bank FDs:

Corporate Fixed Deposits offer higher interest rates than most banks’ Fixed Deposits. For example, currently SBI, India’s biggest public sector bank, is providing interest rates of 5.1 to 5.7 percent for Fixed Deposits of various duration between one to five years. Meanwhile, the Fixed Deposit by Bajaj Finserv which is available on ETMONEY, offers returns up to 7.2 percent per annum for similar durations.

Let’s look at the table below to understand the difference in interest rates between the two.

#2: The penalty period for early withdrawal is lower in the case of corporate FDs:

Company Fixed Deposits

As per RBI guidelines, all Fixed Deposits need to have a minimum penalty period of 3 months. That is, if you withdraw your money within the first three months, you will have to pay a penalty for early withdrawal. Beyond that, it is up to the bank/NBFC/company to decide for how long its penalty period would be. The penalty period for Corporate FDs is usually lower than Bank FDs. For example, in the case of SBI you have to pay a penalty if you decide to withdraw your money anytime before the maturity period. Meanwhile, for FDs in ETMONEY, the penalty period for early withdrawal is only 3 months.

Now that you know the benefits, let’s look at the concern people have around safety aspect of corporate FDs

Do corporate FDs carry higher risk?

When it comes to investing in corporate FDs, a lot of people are scared that since these deposits are unsecured one might lose money if the company defaults. It is important to note here, all NBFC/companies that want to collect deposits have to adhere to stringent regulations and guidelines laid down by the RBI/Ministry of Corporate Affairs (MCA). Hence, though there are more than 10,000 NBFC in India, only a handful of them can accept deposits from the public. Such measures ensure that the risk is minimum for the investors when it comes to putting money into corporate Fixed Deposits.

Corporate Fixed Deposits India

Let’s look at these regulations and guidelines in further detail.

Which companies/NBFC can collect deposits?

RBI is extremely cautious when it comes to allowing NBFCs to collect deposits from the public. First of all, being registered as an NBFC with RBI is not enough, they have to have a legitimate license to accept deposits. Then, the financial assets that the company is managing has to be at least Rs 5,000 crore. Apart from these NBFCs also have to follow a few other guidelines for accepting deposits from the public. And, here they are:

The RBI guidelines that NBFCs have to follow to launch Fixed Deposits

1. The tenure of Fixed Deposits has to be a minimum of one year and a maximum of five years.
   
2. The total deposit that an NBFC can collect can be up to a permissible limit, which again varies for different NBFCs
3. The interest rate for the Fixed Deposits cannot be more than the rate prescribed by the RBI, which is revised from time to time
4. All relevant information regarding the Fixed Deposit has to be disclosed to the RBI
5. They cannot offer any extra benefits or gifts to the depositor

Meanwhile, housing finance companies with specific permits or licenses to collect deposits from the Ministry of Corporate Affairs (MCA) can only accept deposits from the public but up to a certain limit. It is a federal offense to collect deposits from the public without a necessary license from the RBI or MCA.

But that’s not all. NBFC/companies have to maintain a minimum credit rating for collecting deposits

Rating agencies like CRISIL, and ICRA give ratings to companies that can collect deposits from the public. These agencies look at the track record of the company, whether the interest rate and the repayment schedules are revealed to the investors while collecting the deposits, etc. Depending on how strong they are on each criterion, the companies are given ratings like AAA, AA, BBB, and so on. AAA is the highest rating and indicates the company has a solid balance sheet. The NBFC/companies have to maintain a minimum BBB rating to collect deposits from the public.

For example, Bajaj Finance and HDFC are two AAA companies that can collect deposits from the public. And over the years, their Fixed Deposit investors received their payments on time and they always had clarity about the interest rates and the payment schedule. So, to minimize the risk of default, one should stick to AAA-rated corporate Fixed Deposits.

These measures by RBI and MCA ensure that your investments are safe when it comes to investing in corporate Fixed Deposits.

Bottom Line:

So if you have a goal that needs to be achieved within 1 to 5 years, invest in a corporate Fixed Deposit. It provides you the protection of a fixed-income instrument and also provides a higher return than bank FDs.