Corporate fixed deposits are very similar to bank fixed deposits where the money is invested in corporate and not with a bank.
Financial Institutions and Non-Banking Finance Companies (NBFCs) also accept such deposits. There are two types of fixed deposit schemes one is cumulative and other is non-cumulative fixed deposit schemes.
Here are 7 must know points if you are planning to opt for corporate fixed deposits.
1. Corporate fixed deposits are riskier than bank fixed deposits and it is not backed by any Insurance act. Your money in a bank fixed deposit is guaranteed by the Deposit Insurance and Credit Guarantee Corporation up to an amount of Rs 1 Lakh in the bank.
Interest rates offered by corporate fixed deposits are generally higher than those offered by banks.
Interest payment frequency
Interest is paid on monthly, quarterly, half yearly, yearly basis or on maturity depending on the mode of selection.
Individuals can make a premature withdrawal from a corporate fixed deposit. However, there are some charges that are associated with it.
No interest on early withdrawal
Any withdrawal from a Company fixed deposit within six months the company will pay no interest.
If the corporate fixed deposit has a good rating, it is perceived that the company will be able to honour its obligation on timely payment of interest and principle amount.