Corporate fixed deposits are similar to bank fixed deposits in that private and public corporations provide them. For the company deposit, an interest rate is given, as well as a maturity period. You can choose between a cumulative option (where your interest is applied to your deposits) and a non-cumulative option (where you are charged interest after a certain period).
Many agents benefit handsomely from the sale of corporate fixed deposits to their customers. There's nothing wrong with that, but you should know what corporate fixed deposits meaning and know a few key points about Company fixed deposits.
What are the risks associated with corporate fixed deposits?
Corporate fixed deposits are riskier than bank fixed deposits because they do not have the same protection level. “The Deposit Insurance and Credit Guarantee Corporation” guarantees your money in a bank FD up to INR 1 lakh in the bank.
Deposits made in a corporate fixed deposit are inherently risky. The Company may stop paying you interest or, worse, refuse to return your principal. You must have confidence that your funds are safe.
How can you be sure that the money you put into a corporate fixed deposit is safe?
Before you spend your hard-earned money with corporate fixed deposits, make sure to check their credit ranking.
Corporate fixed deposits are rated by rating agencies such as CRISIL. You can rest assured that your money is secure if the corporate fixed deposit has an FAAA rating. This is the highest-ranking, as it ensures that the Company can pay interest on money invested with them and return the principal sum.
If a company has a good credit rating, it will be easier for it to borrow money from you and other people, and it will pay a lower interest rate than a lower-rated corporate fixed deposit.
FAA-rated corporate fixed deposits are also extremely secure but not as safe as FAAA rated personal fixed deposits. To compensate for the increased risk, you will receive a higher rate of interest.
Deposits in an FA-rated company are sufficiently safe. Even if the Company pays you a high-interest rate on the deposits you make with them, you should be cautious if the corporate fixed deposit has a FB or FC rating.
Are business FDs a successful investment?
Corporate fixed deposits tend to be more appealing due to higher interest rates than bank FDs. However, it is important to note that these are unsecured and not supported by collateral. When investing in a business, investors look at the Company's credibility and credit rating. Credit rating companies, on the other hand, have made mistakes in the past. If you've chosen to include Company FDs in your investment portfolio, you should know how safe are corporate fixed deposits and, for that, go through the following factors:
Conservative investors are not welcome :-
Corporate FDs are not for cautious or risk-averse investors because they are not comparable to bank FDs, which have a Rs 1 lakh deposit insurance cover and are frequently controlled by the Reserve Bank of India (RBI). When financial institutions face a crisis, the RBI has intervened several times with swift corrective action to restore normalcy. To protect depositors in the worst-case scenario, the RBI supports a merger with a strong financial institution. If you're a cautious investor who doesn't want to take chances, you should avoid these FDs.
Before you invest, do some research :-
If you're looking to increase the return on your debt portfolio by investing in these FDs, you can thoroughly grasp the Company's financial situation by analyzing its financials. You will regularly discuss the Company's financial reports, so do the due diligence at the time of the deal and afterwards. You should pay close attention to their quarterly reports. You have the option to leave the organization if the numbers start to deteriorate. Your research will also inform you of the current market's best FD interest rates and how safe are corporate fixed deposits.
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Longer tenures are strictly prohibited:
It is preferable to invest with a short-term tenure if you do not see hope in the Company's long-term prospects but still want to take the FD. If you book the FD for a year, for example, you'll have frequent review opportunities to minimize or increase your exposure as required. You should also avoid investing a significant portion of your funds in a single company. To reduce the chance of default, diversify your FDs through many companies while still keeping track of the best FD interest rates.
How to invest in corporate FD online?
Corporate FD can be applied online by visiting the website or filling out an application form. How to invest in corporate FD online outlined below:
Step 1: Go to the online service portal by going to the website.
Step 2: Click on the ‘new user signup' tab under the ‘Customer Login' tab to register.
Step 3: Select your user ID, enter your mobile number, email address, and captcha code, then press ‘Proceed.'
Step 4: Enter the safety code sent to your mobile phone.
- Answer the hidden question.
- Click the "Next" button.
Step 5: A confirmation email with your password will be sent to your registered email address.
Step 6: Login and select the type of FD you want, fill in the required information and make an online payment. The following is the direction you must take: Details of the Scheme > Personal Information> Information about the bank >>Proof info >Deposit number.
So this was all about how to invest in corporate FD online.
Example :- Fixed Deposit at Shriram Transport Finance Company Ltd
The Shriram group includes Shriram transport finance FD. The business provides both the general public and senior citizens fixed deposit plans. They have fixed deposit plans that are both cumulative and non-cumulative. ICRA rates all Shriram transport finance FD interest rates as ‘MAA+/with Stable Outlook,' and CRISIL rates them as ‘FAAA/Stable,' indicating a high degree of protection. Shriram is a non-banking financial company that falls under the Reserve Bank of India's jurisdiction (RBI).
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