• Reasons Why You Should Select Corporate FDs Over Traditional FDs

    In India, traditional fixed deposits are often the very first savings and investment instrument that most people start their financial journey with. FDs are very popular because they guarantee safety and growth without jeopardising the capital amount as no risks are taken with the money. However, there are very few people who know that there is another kind of FD that you can invest in, as an individual, and that is the corporate FD.

    What is a corporate FD and did you know that they are far more beneficial than even traditional FDs? Let's find out more about them.

    While traditional FDs are offered by banks and even Non-Banking Financial Companies, corporate FDs are offered by corporate houses. Also called Non-Convertible Debentures (NCD), corporates offer these FDs as a means of raising funds for their own business expansion or maintenance, but they continue to offer all the benefits of traditional FDs. So, what makes them stand out from traditional FDs?

    Corporate FD vs Bank FD

    Here are some of the major reasons why corporate FDs are better than traditional FDs:

    • The defining factor of corporate FDs is that their interest rate is much higher than that of traditional FDs. Many corporate FDs offer senior citizens an additional rate of interest, just like FDs offered by banks.
    • There are no credit ratings for FDs offered by banks whereas corporate FDs have credit ratings by independent rating agencies which tell you how reliable these FDs are.
    • You can get a steady source of income from your corporate FD on a more flexible scale than from a traditional FD. Corporate FDs offer you interest payout options that range from monthly, quarterly, and half-yearly to annually and cumulative. The latter is when you get all your accumulated interest paid out at the time of maturity only.
    • The tenure of corporate FDs can range from one year and go up to 10 years so this is good for those who are looking for long-term investment plans where their money will be safe but will continue to accrue interest over time.
    • There are a wide range of corporate FDs to choose from which are offered by leading and reputed corporate houses.
    • Premature withdrawal is allowed for corporate FDs, just like for traditional FDs, without any restrictions.
    • Liquidity is also easy with corporate FDs.

    Corporate FDs can be opened by anyone who is an Indian resident. It can also be opened by other entities such as Hindu Undivided Families (HUFs), corporates, clubs, associations, societies, and partnership firms.

    How to Choose a Good Corporate FD

    Before you start investing in a corporate FD, it would be wise to first make a list of all the FDs that are offered by reputed corporates. Compare their credit ratings. Next, compare the interest rates offered by different corporates. After that, compare the interest rates offered by the same corporate but within different tenures. Use an FD online calculator, which is free and easy to use, to calculate how much your interest amount and maturity amount will be.

    Choose the right tenure and right corporate based on all these factors and you are sure to make the right choice with regard to the corporate FD that will give you the highest returns and maximum safety as well.

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