Corporate Fixed Deposits (FDs) are financial instruments offered by Non-banking Financial Companies (NBFCs) or corporate entities to raise funds from the public. These FDs are similar to traditional bank fixed deposits, but they are issued by private companies instead of banks.
Here are some key points to know about Corporate FDs :
- Issuers: Corporate FDs are offered by NBFCs, housing finance companies, manufacturing companies and other corporate entities that have been authorized by the Reserve bank of India to accept fixed deposits.
- Interest Rates: Corporate FDs generally offer higher interest rates compared to bank FDs. The interest rates vary among different companies and are influenced by factors such as the credit rating of the issuer and prevailing market conditions.
- Credit Rating: It is important to consider the credit rating of the company offering the FD. Credit rating agencies evaluate the financial stability and repayment capacity of the issuer. Higher-rated companies are considered more reliable and carry lower-default risk.
- Risk and Returns: While corporate FDs offer the potential for higher returns, they also involve higher risks compared to bank FDs. If the issuer faces financial difficulties or defaults on payments, there is a risk of losing your principal amount and interest earnings. Its important to carefully evaluate the financial health and track record of the company before investing.
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