Corporate Fixed Deposits or Company Fixed Deposits are provided by Non-Banking Financial Companies or NBFCs and these corporate or company fixed deposit schemes are reinforced with higher interest rates compared to bank FDs. Though the DICGC (deposit insurance of up to Rs. 5 lakh, which is only for bank FDs) does not cover company FDs which makes a serious concern among the investors, yet you must verify the credit quality of the respective organisation to address it. Multiple credit rating firms, such as CRISIL, ICRA and CARE, assess the credit health of these non-banking financial companies (NBFCs). Check for an overall 'Stable' score by credit-rating agencies before investing.
You may be able to raise returns by around 100-150 basis points (bps) by switching from a bank FD to a AAA-rated corporate FD and by considering this we have covered below the 6 Top Rated Company FDs that are offering higher interest rates on the current scenario.
|Company||ROI per annum in %||Credit Rating|
|KTDFC||8.00||8.00||7.75||Assured by Kerala Govt.|
|PNB Housing Finance||6.20||6.60||6.70||CRISIL-FAA+CARE-AA|
|LIC Housing Finance||5.65||5.75||5.75||CRISIL- FAAA|
|M&M Finance(Samruddhi Scheme)||5.70||6.30||6.45||CRISIL- FAAA|
Look up the bond yield of the company before investing in a corporate FD. You must reconsider if it is very high, or the trading volume is weak. Consider several parameters - the investment horizon and liquidity criteria, post-tax returns, and risk in case if you are looking for alternatives. The five-year Post Office Time Deposit Account, providing 6.7 per cent, can be considered among alternatives as it provides the benefit of Section 80C, but it is not easy to operate Post Office services. Another alternative is the RBI Floating Rate Bond (taxable), which gives 35 bps better returns than the National Savings Certificate (currently 7.15 per cent). The Public Provident Fund (7,1 per cent) and the Sukanya Samriddhi Account (7,6 per cent) remain enticing for long-term savings options.
The Senior Citizen Savings Scheme (7.4 per cent) and Prime Minister Vaya Vandana Yojana (8-8.3 per cent) may be considered by senior citizens looking to generate stable income. Senior citizens can also prefer Jeevan Akshay VII - the annuity product of the Life Insurance Company which offers 8.1 per cent to 60-year-olds and 10.5 per cent to 70-year-olds. Coming again to the Corporate FDs several NBFCs are facing problems with their own refinancing. It's not worth taking the risk of investing in them for an extra 100-200 basis points. But be cautious, cling to FDs from companies that have excellent track records or a government entity's patronage and also that have AAA or AA+ score at least.