Bank Vs Corporate FD: Corporate Fixed Deposit (FD), also known as Company Term Deposit, is similar to bank FD but is offered by non-banking financial companies (NBFCs). In this, you can get more interest than a bank FD. However, being a scheme offered by private companies, it is more risky than a bank FD. It is important to assess the risk before investing. (Corporate FD)

Many investors find it difficult to choose between corporate and bank FD. Although both have the purpose of increasing your savings, you need to know some important differences between these two FDs before making a decision.

Know what Corporate FD is-

Corporate Fixed Deposits (FDs) are offered by companies, which are similar to bank FDs offered by banks. They are often provided by non-banking financial institutions (NBFIs). Corporate FDs function similarly to bank FDs, but generally offer higher interest rates. Companies issue these FDs as a means of raising funds from investors.

The interest rates on these can be 1 to 1.50 percent higher than bank FDs. The valuation of their FD schemes is done by many rating agencies, including ICRA, CARE, and CRISIL. They give ratings on that basis. Investment options are also available for different tenures in these.

Why is there doubt on corporate FDs?

Corporate FDs are not insured. Hence, the risk increases even more. The option of investing in corporate FDs with good credit from reputed credit rating agencies can be considered safe to a great extent. In this way, bank FDs give low returns with low risk, and corporate FDs give high returns with high risk.

Which is better, a corporate or a bank FD?

By investing in corporate FDs, you can get higher returns, provided you are ready to take risks. However, before investing, do check the financial health and credibility of the company. If you want a safe investment, then a bank FD is a better option as it is less risky than corporate FD.

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