Investing in corporate FDs? Know the pros and cons

Even though there are many ways to invest, Bank Fixed Deposits (Bank FDs) are still the choice of many investors who don’t want to take risks. It is a favorite in every Indian home because it is easy to make.

But did you know that you can also put money into certain companies and non-banking finance companies (NBFCs)? This kind of deposit is called a Corporate Fixed Deposit (Corporate FD).

Fixed deposits are a convenient way for many companies and NBFCs to get money. Corporate FD gives fixed and predictable returns, just like a Bank FD. Also, unlike the returns on debt instruments, the returns on Corporate FD are not affected by changes in the market for interest rates. Most corporate fixed deposits have terms that last from 1 to 5 years.

Corporate FDs give 0.5% to 3% more interest than Bank FDs for identical maturities. Some Corporate FDs pay 7-8%. After locking in a deposit rate, you’ll get it till maturity. You can borrow 75% of your corporate fixed deposit.