Corporate Fixed Deposits

CFD - Corporate fixed deposit

As an investor, we always expect the steady returns and investment safety. Corporate fixed deposit is an investment avenue that delivers fixed return, decent security at the minimum risk.

Corporate or company fixed deposit is the same as Bank FDs. Fixed deposit with a bank is usually the first step when saver decides to consciously start investing his surplus. Corporate Fixed Deposit is designed almost on a similar basis. It aims to have a higher yield as compared to bank FD.

CFD is issued by finance companies, housing financing firms, and other Non-banking finance companies (NBFCs). They issue the CFD with different interest rates and for different tenure/periods.It is an excellent choice of investment for the senior citizens who expect better returns than the bank fixed deposits. An investor can invest in the CFD with the companies for the fixed tenure at the fixed interest rate. In simple words-

A corporate fixed deposit means the company borrowing unsecured loans from the investor.

Types of Corporate Fixed Deposits:

Under CFD there are two types of fixed deposits scheme available:

  • Cumulative CFD- In this type of FD, interest is stock-piled with the principal investment and then the complete amount is paid to the investor at the end of the tenure. No interest is paid to the investor during the investment period.
  • Non-cumulative CFD- Here, the interest is paid to the investor in regular intervals- monthly, quarterly, half-yearly, or annually, depending on the investor’s choice.

Why should you invest in CFD?

Following are the key features of the corporate fixed deposit, helping you to understand the product with a better perspective :

  • Corporate fixed deposits offer fixed tenure and fixed rate of returns.
  • How long to stay invested in CFD is the investor’s decision. They can choose to stay invested in the corporate fixed deposit either for a few months or years.
  • Early exit (premature withdrawal) from the CFD is allowed*.
  • CFD offering companies are rated by CRISIL and ICRA rating agencies.
  • Corporate fixed deposits are administered by the Companies Act 1956 u/s 58-A.

Who should invest in CFD?

  • Investors who desire stable returns with no or less risk.
  • Senior citizens can earn the benefit of regular income by investing in corporate FDs with additional / special rate.

Difference between company FDs and Bank FDs:

  Company Fixed Deposit Bank Fixed Deposit
It is issued by Finance companies & NBFCs Banks
It is regulated under Companies Act 1956 Banking Regulation Act, 1949.
Insured investment up to ₹10,000 ₹1,00,000
Offered interest on Higher than bank FDs Lower than CFDs
Minimum tenure to invest 6 months (Half-yearly) 7 days (week)

Some of the Companies currently accepting Fixed Deposits

COMPANY INTEREST RATE Period Print Form / Rate Card Give Rating in a column Sr. citizen Renewal Benefit

SHRIRAM UNNATI FIXED DEPOSIT

8.15% 36 Months Download FormView Rates FAA 0.25% 0.25%

BAJAJ FINANCE LTD.

7.00% 36 Months Download FormView Rates FAA 0.25% 0.10%

MAHINDRA & MAHINDRA FINANCE LTD.

6.30% 36 Months Download FormView Rates FAA 0.25% -

HDFC SPECIAL DEPOSITS UPTO 2 CRORE

5.95% 33 Months Download FormView Rates MAAA by ICRA and AAA/Stable by CRISIL 0.25% 0.10%

HDFC LTD PREMIUM DEPOSIT PLAN (Upto 2 Cr)

5.85% 30 Months Download FormView Rates MAAA by ICRA and AAA/Stable by CRISIL 0.25% 0.10%

HDFC Deposits Individual - Regular

5.95% 36 Months Download FormView Rates MAAA by ICRA and AAA/Stable by CRISIL 0.25% 0.10%

PNB Deposits Individual- Regular

6.60% 36 Months Download FormView Rates AAA 0.25% -

LIC HOUSING LTD

5.75% 36 Months Download FormView Rates FAA 0.25% -

ICICI Home Finance Fixed Deposits

5.95% 36 Months Download FormView Rates MAAA 0.25% -

Register now and start investing in Corporate Fixed Deposits

Frequently Asked Questions on CFD

The benefits of investing in company fixed deposits are the high rate of interest, tenure flexibility, and zero income tax if the income interest is up to ₹5000 in a financial year. CFDs are certified and rated AAA by the renounced credit rating agencies such as CRISIL. How does the AAA rating ensure the safety of the company's fixed deposit? AAA credit rating means principal and interest safe.

Longer the investment, the more the interest rate. Generally, the company FD rate ranges between 8-9%. Cumulative CFD has compounding interest rates. By investing in a cumulative scheme investor can expect a high rate of interest on the total investment. Interest is paid monthly, quarterly, and half-yearly or annually- depends upon the investor’s choice of frequency. To the senior citizens, some companies pay 0.25% more interest on the total CFD investment.

CFDs are for the fixed tenure; therefore many companies allow no withdrawal up to 3 or 6 months. By any chance, if you want or have to withdraw prematurely the chances of deduction in the interest rate are possible. Once the tenure of the FD is completed, the entire amount will be credited to your bank account. In case of a change in the bank account, you need to notify about the same to the company to avoid a delay in payment.

To consider the taxation regime on the CFDs, it is important to note that the interest earned on the corporate FD is taxable. The CFD earned interest falls under the ‘income from other sources’ category of the investor.

TDS deduction is valid over the exceeding interest amount of above ₹5,000 a year. By any chance, if the investor falls under the zero/NIL tax slab, he/she has to submit form 15H every financial year to avoid TDS deduction.

There are three important factors to determine the right selection of corporate FD:

  • Credit-rating: One must always check the credit rating before investing in company FD. Credit rating for the CFD is issued by a rating agency such as CRISIL.
  • Interest Rates: After checking the credit rating of the CFD, check the corporate fixed deposit rates offered by the company.
  • Repayment History: Companies with a better repayment history are a safer bet for investors

Under the strict conditions company accepts the fixed deposit application. If the company is categorized as a financial institution/ company then permission should be obtained from the Reserve Bank of India (RBI) to accept the CFD applications. Company fixed deposit rules are managed under the companies act 1956 u/s 58-A.

It is important to note that any regulator does not guarantee the repayment of the interest and fixed deposit. Although each state defines the stringent law for the same- e.g. In Maharashtra, the state government has a state depositor’s protection act. Laws under this act bestow power to the investor to pursue the defaulted companies.

Bank FD and corporate FD consist same features. In terms of the interest rate, bank FD offers less than corporate FD.

Yes, you can make an early exit from the corporate FD i.e. before the maturity period of the CFD. Although before considering this option it is important for you to check with the invested company since some of the NBFCs demand the minimum investment period which can range between 6 months to a year.

In most cases, yes they can invest. Senior citizens typically get 0.25% to 0.50% additional interest rate on fixed deposits.

Suppose the investor has applied for the CFD offline/ Physical form; the FD Company issue the Physical copy of FD to investor. If the investor apply in Electronic mode, then the investor gets FD via Email.

The investor needs to complete their KYC with the company. Documents required to submit in the company are:

  • Updated passport-sized photo
  • ID proof- Passport, PAN card (mandatory), voter ID, driving license, or AADHAR card.
  • Address proof- Passport/AADHAR card or utility bill such as electricity/ telephone/ gas line/water/post-paid mobile bill not older than 2 months.
  • Copy of signature proof.

Yes, as a Corporate Fixed Deposit holder, you will receive the FD receipt as a document of ownership. You need to obtain the same from the company in which you have invested for company FDs. Please note that: The company FD receipts are non-transferrable.

Some corporate companies allow NRIs to invest in fixed deposits.

Some corporate companies allow recurring deposit options with fixed returns. The auto-renewal facility is permitted by most of the fixed deposit companies. While investing investor has to choose the repayment option, either auto-renewed or Repay.

The minimum amount varies from company to company. It can be as low as Rs.10000/-.

Investing in fixed deposits in India is one of the safest investment options available. The interest offered on FDs by Companies makes it a good choice.

Whether in an NBFC, bank, or post office, all fixed deposits are not affected by market fluctuations and offer fixed and assured return of interest over the tenure chosen.

Things to remember before investing in corporate FD:

  • In the case of the CFD minor investor, the form has to be signed by the immediate guardian.
  • If the deposit holder is deceased, the proceeds will be credited to their account by the company on issuing the death certificate to them.
  • FDs are accepted by the cheque payment. In case any company asks for the cash payment, please confirm the same with the company’s management.
  • The FD receipts are non-transferrable.