Know Different Features of Corporate Fixed Deposits
Fixed Deposits are one of the most popular investment options offering assured returns over a pre-specified time frame. They are also the go-to option for risk-averse individuals, considering the avenue for assured returns.
FDs are offered by both banks and financial institutions. The FDs offered by financial institutions or NBFCs are called corporate Fixed Deposits. Typically, there are no distinctive features pertaining to these investments. However, corporate FD rates tend to be on the higher side.
Read on to gather details pertaining to corporate FDs.
Features of Corporate FDs
Similar to banks, NBFCs also provide FDs with the flexibility to choose investment amount and tenure. Mentioned below are a few features exhibited by Corporate Fixed Deposits:
01. Assured returns
One of the most significant advantages of investing in FDs is that they offer guaranteed returns. Note that the interest rate that NBFCs provide on these investments remains constant throughout the tenure. It is not affected by volatility or changes in market conditions.
Thus, you can stay assured about the safety of your investments. This can be extremely helpful for you in planning your financial obligations. You can also consider using an online FD calculator to assess the amount of returns you might earn over the tenure.
02. Higher interest rates
Another significant benefit of corporate FDs is that they come with a higher rate of interest as compared to regular FDs. Corporate FD rates at most NBFCs start from 7.0%, which is substantially high and can help you create wealth over the long term.
In addition, these FDs also provide a higher interest rate for senior citizens. This might help retired senior citizens build a substantial retirement corpus. You can also talk with the NBFC and ask for regular FD payouts. This can be agreed upon for monthly or quarterly payments, which will help you meet your short-term financial requirements.
03. Flexible tenure
Typically, the tenure for a corporate Fixed Deposit account ranges between 1 and 5 years. You have the flexibility to choose a tenure as per your requirements. Thus, you can assess your financial goals and invest accordingly.
To decide on an ideal tenure, consider utilising an online FD calculator, which displays expected returns depending on the principal amount and tenure. You can use the sliders on this calculator to determine which tenure would work the best for you.
04. Lower penalty for early withdrawal
RBI guidelines state that every FD should have a minimum penalty period of 3 months. This means that if you withdraw your money within this time frame, you will have to pay an early withdrawal penalty.
However, the decision regarding the length of the penalty period depends on the hands of banks and financial institutions. In this regard, the penalty charges for corporate FDs are less than that of banks.
Points Regarding Corporate FDs
Apart from knowing the features and benefits of these investments, it is critical to know about the guidelines set by the RBI pertaining to corporate FDs. Find about them below:
- The investment tenure should be between 1 and 5 years.
- The overall deposit an NBFC can receive should fall within the permissible limit. This varies from one NBFC to another.
- Corporate FD rates should be kept in accordance with the rules set by the RBI. Note that the RBI revises this rate from time to time.
- An NBFC should disclose all relevant details regarding these investments to RBI.
- NBFCs are not allowed to offer additional gifts or discounts to individuals.
Note that the RBI is extremely cautious in allowing financial institutions to collect fixed deposits from the public. NBFCs need to obtain particular licences to be eligible in dealing with FDs. Additionally, financial assets of that company should be more than Rs.5,000 Crores.
Things to Consider Before Investing in Corporate FDs
Although corporate FDs provide a higher rate of interest than savings accounts, you need to consider a few pointers. Find about them below:
01. Thorough comparison between NBFCs
There are various financial institutions that offer FDs. However, the corporate FD rates across these institutions vary. Thus, it is crucial to perform a thorough comparison between different NBFCs available in the market to make an informed decision. In this regard, you can resort to Bajaj MARKETS, which is a diversified marketplace of Fixed Deposit offers by leading NBFCs of the country.
02. Premature withdrawal
Most banks penalise FD investors who withdraw funds before the penalty period. This is typically three months after investing. The same is true for Corporate FDs, and there is a penalty for early withdrawal. Thus, before investing, it is best to understand the amount of penalty.
Evidently, one of the many benefits of this investment instrument is the higher corporate FD rates. This can help you create substantial wealth over the long term.
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