Up to 9% interest rate: Corporate FDs vs bank fixed deposits; Which offers higher interest rate? Fixed Deposits serve as a popular choice for long-term investments, particularly for older investors aiming for a secure retirement. The tenure period plays a crucial role in determining when investors will receive returns before maturity. In corporate fixed deposits, the tenure typically ranges from six months to 5 years, offering a shorter duration compared to bank fixed deposits
Banks provide a range of fixed deposit investment options tailored to meet the needs of both short-term and long-term investors. Fixed deposits boast numerous benefits. One of the key advantages is the assurance of a guaranteed return on your investment. Additionally, investing in fixed deposits offers tax benefits, as the returns are tax-free. Moreover, investors enjoy flexibility with fixed deposits, as they can select the investment duration and amount according to their preferences. Another perk is the possibility of obtaining a loan against your fixed deposit based on your investment. In case of emergencies, you have the option to close your fixed deposit and withdraw the funds immediately.Also read: FD interest rate up to 8.1%: Top banks offering highest interest rates on 1-3 year fixed deposit tenure
Numerous companies, corporates, and Non-Banking Financial Companies (NBFCs), akin to banks, gather and deposit funds for a predetermined period, offering interest in return. Corporate fixed deposits represent the fixed deposit schemes of these entities. Similar to bank fixed deposits, corporate FDs provide interest earnings and offer flexibility in choosing the investment amount and duration.
Corporate FD vs Bank FDs: Interest rates comparison
Company Fixed Deposit RatesCompany NameCredit RatingInterest Rates (% p.a.)Additional interest rate for senior citizenHighest Rate SlabApplicable tenure1-year
tenure3-year
tenure5-year
tenureShriram Finance*ICRA - AA+/Stable
IND AA+/Stable by India Ratings and Research8.2750 months and 5 years7.53%8.18%8.27%0.50%Mahindra FinanceCRISIL - AAA/Stable India Ratings - IND AAA/Stable8.053 years, 4 years and 5 years7.60%8.05%8.05%0.25%Manipal Housing Finance Syndicate Ltd.ACUITE - ACUITE A8.251 year, 2 years and 3 years8.25%8.25%7.75%0.25%PNB Housing Finance Ltd.CRISIL - AA/Positive
CARE - AA/Positive7.8536-47 months7.45%7.85%7.65%0.30%Sundaram Home FinanceCRISIL - AAA/Stable
ICRA - AAA/Stable7.94 years and 5 years7.45%7.75%7.90%0.35%-0.50%Muthoot Capital Services LimitedCRISIL - A+/Stable8.385 years7.21%8.07%8.38%0.50%ICICI Home FinanceCRISIL - AAA/Stable
ICRA - AAA/Stable
CARE - AAA/Stable7.653 to less than 5 years7.25%7.65%7.60%0.25%Can Fin Homes Ltd.ICRA - AAA/Stable7.53 years6.50%7.50%6.75%0.50%Bajaj Finance LimitedCRISIL - AAA/Stable
ICRA - AAA/Stable8.13-5 years7.40%8.10%8.10%0.25%LIC Housing Finance Ltd.CRISIL - AAA/Stable7.753 years and 5 years7.25%7.75%7.75%0.25%*At Monthly Rests. Additional interest of 0.25% p.a on all renewals, where the deposit is matured. Additional interest of 0.10% p.a. for women depositors.Data as on 3rd April 2024Source: Paisabazaar.com
Bank Fixed Deposit RatesBank NameInterest Rates (p.a.)Highest slab1-year tenure (%)3-year tenure (%)5-year tenure (%)%TenurePRIVATE SECTOR BANKSAxis Bank7.20 17 months to less than 18 months6.70 7.10 7.00 Bandhan Bank7.85 500 days7.25 7.25 5.85 City Union Bank7.00 400 days6.756.50 6.25 CSB Bank7.75 401 days5.00 5.75 5.75 DBS Bank7.50 376 days to 540 days7.00 6.50 6.50 DCB Bank8.00 25 months to 26 months7.15 7.60 7.40 Federal Bank7.50 500 days6.80 7.00 6.60 HDFC Bank7.25 18 months to less than 21 months6.60 7.00 7.00 ICICI Bank7.20 15 months to 2 years6.70 7.00 7.00 IDFC First Bank8.00 500 days6.50 7.25 7.00IndusInd Bank7.75 1 year to 2 years7.75 7.25 7.25 Jammu & Kashmir Bank7.10 1 year to less than 2 years7.10 6.50 6.50 Karur Vysya Bank7.50 444 days7.00 7.00 7.00 Kotak Mahindra Bank7.40 390 days to less than 23 months7.10 7.00 6.20 Nainital Bank7.05 400 days - Naini Plus 2023 Deposit Scheme6.70 6.25 5.75 RBL Bank8.10 18 months to 2 years7.50 7.50 7.10 SBM Bank India8.50Above 3 years 2 days to less than 5 years7.057.307.75South Indian Bank7.40 400 Days6.70 6.70 6.00 Tamilnad Mercantile Bank7.75 444 days (TMB 444 – Special Deposit)7.006.50 6.50 YES Bank7.75 18 month to less than 2 years7.25 7.25 7.25 PUBLIC SECTOR BANKSBank of Baroda7.25 Above 2 years to 3 years6.85 7.25 6.50 Bank of India7.25 2 years6.80 6.50 6.00Bank of Maharashtra6.50 1 year6.50 5.75 5.75Canara Bank7.25 444 days6.85 6.80 6.70 Central Bank of India7.25 555 days6.75 6.50 6.25 Indian Bank7.25 400 days - IND SUPER6.10 6.256.25Indian Overseas Bank7.30 444 days6.90 6.50 6.50 Punjab National Bank7.25 400 days6.75 7.00 6.50 Punjab & Sind Bank7.25 444 days6.20 6.00 6.00 State Bank of India7.00 2 years to less than 3 years6.80 6.75 6.50 Union Bank of India7.25 399 days6.75 6.50 6.50 FOREIGN BANKSDeutsche Bank8.00 Above 1 year to 3 years7.00 8.00 7.50 HSBC Bank7.25 732 days to less than 3 years4.00 7.00 6.00 Standard Chartered Bank7.50 2 years to less than 3 years7.15 7.10 6.75 Source: Paisabazaar.comInterest rates as of 3 April 2024
Senior Citizen Bank Fixed Deposit RatesBank NameInterest Rates (p.a.)Additional rates offered to Super Senior Citizen* (over and above to senior citizen rates)Highest slab1-year tenure (%)3-year tenure (%)5-year tenure (%)%TenurePRIVATE SECTOR BANKSAxis Bank7.85 17 months to less than 18 months7.20 7.60 7.75 ---Bandhan Bank8.35 500 days7.75 7.75 6.60 ---City Union Bank7.50 400 days7.006.75 6.50 ---CSB Bank7.75 401 days5.50 6.25 6.25 ---DBS Bank8.00 376 days to 540 days7.50 7.00 7.00 ---DCB Bank8.60 25 months to 26 months7.65 8.10 7.90 ---Federal Bank8.00 500 days7.30 7.50 7.25 ---HDFC Bank7.75 5 years 1 day to 10 years & 18 months to less than 21 months7.10 7.50 7.50 ---ICICI Bank7.75 15 months to 2 years7.20 7.50 7.50 ---IDFC First Bank8.50 500 days7.00 7.75 7.50---IndusInd Bank8.25 1 year to 2 years8.25 7.75 7.75 ---Jammu & Kashmir Bank7.60 1 year to less than 2 years7.60 7.00 7.00 ---Karur Vysya Bank8.00 444 days7.40 7.40 7.40 ---Kotak Mahindra Bank7.90 390 days to less than 23 months7.60 7.60 6.70 ---Nainital Bank7.55 400 days - Naini Plus 2023 Deposit Scheme7.20 6.75 6.25 0.10% on all tenuresRBL Bank8.60 18 months to 2 years8.00 8.00 7.60 0.25% on all tenuresSBM Bank India9.00Above 3 years 2 days to less than 5 years7.557.808.25---South Indian Bank7.90 400 Days7.20 7.20 6.50 ---Tamilnad Mercantile Bank8.25 444 days (TMB 444 – Special Deposit)7.507.00 7.00 ---YES Bank8.25 18 month to less than 2 years7.75 8.00 8.00 ---PUBLIC SECTOR BANKSBank of Baroda7.75 Above 2 years to 3 years7.35 7.75 7.15 ---Bank of India7.75 2 years7.30 7.25 6.750.15% on tenures of 180 days to 10 yearsBank of Maharashtra7.00 1 year7.00 6.25 6.25 ---Canara Bank7.75 444 days7.35 7.30 7.20 0.10% on 444 daysCentral Bank of India7.75 555 days7.25 7.00 6.75 ---Indian Bank7.75 400 days - IND SUPER6.60 6.756.750.25% on all tenuresIndian Overseas Bank7.80 444 days7.40 7.00 7.00 0.25% on all tenuresPunjab National Bank7.75 400 days7.25 7.50 7.00 0.30% for tenures up to 5 yearsPunjab & Sind Bank7.75 444 days6.70 6.50 6.50 0.15% on tenure of 444 daysState Bank of India7.50 2 years to less than 3 years7.30 7.25 7.50 ---Union Bank of India7.75 399 days7.25 7.00 7.00 0.25% on all tenuresFOREIGN BANKSDeutsche Bank8.00 Above 1 year to 3 years7.00 8.00 7.50 ---HSBC Bank7.75 732 days to less than 3 years4.50 7.50 6.50 ---Standard Chartered Bank8.00 2 years to less than 3 years7.65 7.60 7.25 ---Note: *Depositors aged 80 years and aboveSource: Paisabazaar.comInterest rates as of 3 April 2024
Difference Between Corporate Fixed Deposits and Bank Fixed Deposits
Let us now look at the difference between corporate FDs and bank FDs as per broking firm Nirmal Bang's website.
Tenure
Fixed Deposits serve as a popular choice for long-term investments, particularly for older investors aiming for a secure retirement. The tenure period plays a crucial role in determining when investors will receive returns before maturity. In corporate fixed deposits, the tenure typically ranges from six months to 5 years, offering a shorter duration compared to bank fixed deposits. Bank fixed deposits, on the other hand, provide tenures spanning from months to several years, often extending beyond what corporate fixed deposits offer. For those seeking to invest for extended periods, bank fixed deposits emerge as the preferred choice over corporate fixed deposits.
Also read: PPF, SSY, Senior Citizen Savings Scheme, other post office schemes interest rates for April- June quarter 2024
Investment risk
Before making any investment, it's prudent to assess the associated risks and determine one's risk tolerance. While fixed deposits are generally considered safe investments, they are not entirely risk-free, especially over the long term. Corporate fixed deposits, being unsecured, carry a higher level of risk, with the possibility of the company facing financial difficulties or even collapsing. However, one advantage of corporate fixed deposits is that they are not influenced by market fluctuations. In contrast, bank fixed deposits are secured investments and typically pose lower risks, providing investors with a higher level of security. In 2020, the government had increased the insurance cover on deposits by five times to Rs 5 lakh. The enhanced deposit insurance cover of Rs 5 lakh came into effect from February 4, 2020.
Premature withdrawal penalty
In situations requiring urgent funds, individuals often consider withdrawing from their fixed deposits. However, both banks and corporates typically impose penalties for premature withdrawals before the completion of the tenure. When comparing the penalty structures of both financial institutions, bank fixed deposits tend to be a better option. Banks typically charge a penalty of around 1-2% on the interest for premature withdrawals. On the other hand, the scenario with corporates varies. Not all corporate entities permit premature withdrawal before three to six months from the investment date. In cases where premature withdrawal is allowed by corporates, no interest accrues on the deposit. Additionally, for withdrawals made after six to twelve months, certain companies impose a penalty ranging from 2-3 percent. Therefore, considering the penalty structures, bank fixed deposits may be a preferable choice for those anticipating the possibility of premature withdrawals.
Tips for choosing a corporate FDs
Before you invest in corporate FDs, consider these factors according to HDFC Securities website.
Credit Rating: Opt for higher-rated corporate FDs based on its credit rating which indicates the underlying risk of the company.Company Background: Assess a company's business viability by referring to its Financial Statements, Management Discussion and Analysis (MD & A).Repayment History: Companies repayment history helps to determine company's credit score, credibility and stability.
Important FAQs on corporate FDs
As per the SBI Securities website, here are a few important FAQs on corporate FDs.
Bank FDs are regulated by RBI. Is there any regulatory authority who monitors corporate deposit schemes as well?
Yes. Corporate FDs, as issued by NBFCs & HFCs are regulated by Reserve Bank of India (RBI) & National Housing Bank (NHB) respectively.In what way do I earn by investing in CFDs?
By investing in CFDs you could earn fixed interest for the entire tenure you have opted for. Apart from cumulative option where you get the interest along with the principle at maturity, there are various regular income options available including monthly, quarterly, semi-annually and annual. The maturity period ranges from 12-120 months. This gives you the flexibility to choose between short and long tenures based on the investment goals.With how much min. amount I can start investing in CFDs?
The minimum & maximum deposit amount varies from issuer to issuer. Typically, investment could be started from as low as Rs. 25,000 and goes as high as Rs. 20 Crores for individual investors.Is there any benefit for Sr. Citizens?
Yes. Sr. Citizens would get additional interest from 0.25% - 0.50% in CFDs.Are the returns on Corporate FDs taxable? If yes, what is the TDS treatment?
Yes. Interest earned from Corporate FD is taxed as per the marginal tax slab rate of an individual. Also, 10% TDS is deducted from the interest payable if total interest earned by an individual is >=Rs. 5,000/- in a Financial Year.Resident Individuals can avail exemption from TDS by submitting form 15G / 15H (as applicable). However, this declaration has to be submitted in every FY until maturity.
Can I take out my money before the maturity?
Yes. You can. However, there is a basic lock-in of 3 months from the date of deposit during which premature withdrawal is not allowed. Upon completion of 3 months, you could take the money out in case of any emergency by paying a nominal penalty on the interest.This story originally appeared on: India Times - Author:Faqs of Insurances
