Corporate Fixed Deposits
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Company Fixed Deposits (corporate FDs) are term deposits kept for a set amount of time at a set interest rate. Financial institutions, both banking and non-banking, provide Company Fixed Deposits. (NBFCs). Various companies' fixed deposits have maturities that can range from a few months to a few years.
Advantages of Corporate Fixed Deposits over bank Fixed Deposits
Interest rates for corporate FDs are higher than bank FDs :
Compared to most banks' fixed deposits, corporate fixed deposits have greater interest rates. For instance, SBI, the largest public sector bank in India, now offers interest rates of 5.1 to 5.7 percent for fixed deposits with terms ranging from one to five years. In contrast, the Bajaj Finserv Fixed Deposit, offers yields of up to 7.2 percent annually for identical time periods.
To further appreciate the differences in interest rates between the two, let's look at the table below.
2. The penalty period for early withdrawal is lower in the case of corporate FDs:
According to RBI regulations, all Fixed Deposits must have a minimum three-month penalty term. That is, you will incur an early withdrawal fee if you take your money out before the first three months have passed. Beyond that, the bank, NBFC, or corporation will determine how long the penalty period will be. Corporate FDs often have shorter penalty periods than bank FDs. For instance, if you want to withdraw your money from SBI before the maturity period, you would be subject to a fee. The penalty term for early withdrawal is only three months for FDs, however.
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