For those looking beyond traditional bank deposits, corporate fixed deposits (FDs) from non-banking financial companies (NBFCs) and housing finance companies (HFCs) could be an option. These deposits often offer higher interest rates than bank FDs, attracting investors keen on maximising their returns.
“One of the key advantages is the higher interest rates that corporate FDs give compared to traditional bank FDs, often 1-2% more, depending on the company’s credit rating and the duration of the deposit,” said Adhil Shetty, CEO of BankBazaar.com.
What corporate FDs offer
Higher interest rates – Usually 1-2% above bank FDs, with rates varying based on the issuing company’s creditworthiness and the deposit tenure.
Flexible tenures – Investors can choose deposit periods ranging from a few months to several years, depending on their financial needs.
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Low minimum investment – Many corporate FDs require a lower initial deposit, making them accessible to a wider range of investors.
Diversification – These deposits can be part of a broader investment strategy, helping to balance risk and return when combined with other assets.
Regular income – Interest payout options include monthly, quarterly, or annual payments, which can be beneficial for those relying on periodic returns.
How do corporate FD interest rates compare in January 2025?
Take a look at the 10 corporate fixed deposits (FDs), according to PaisaBazaar:
1. Shriram Finance
Credit rating: ICRA - AA+/Stable, IND AA+/Stable by India Ratings and Research
Highest rate slab: 8.47%
Tenure: 50 months, 5 years
Interest rates: 1 year - 7.59%,
3 years - 8.38%
5 years - 8.47%
Senior citizen additional interest: 0.50%
2. Mahindra Finance
Credit rating: CRISIL - AAA/Stable, India Ratings - IND AAA/Stable
Highest rate slab: 8.10%
Tenure: 3 years, 5 years
Interest rates: 1 year - 7.50%
3 years - 8.10%
5 years - 8.10%
Senior citizen additional interest: 0.10%-0.25%
3. Manipal Housing Finance Syndicate Ltd
Credit rating: ACUITE - ACUITE A
Highest rate slab: 8.25%
Interest rates: 1 year - 8.25%
3 years - 8.25%
5 years - 7.75%
Senior citizen additional interest: 0.25%
4. PNB Housing Finance Ltd
Credit rating: CRISIL - AA+/Stable, CARE - AA+/Stable
Highest rate slab: 7.75% (tenure: 36-47 months)
Interest rates: 1 year - 7.45%, 3 years - 7.75%, 5 years - 7.75%
Senior citizen additional interest: 0.20%-0.30%
5. Sundaram Home Finance
Credit rating: CRISIL - AAA/Stable, ICRA - AAA/Stable
Highest rate slab: 7.90% (tenure: 4 years, 5 years)
Interest rates:
1 year - 7.45%
3 years - 7.75%
5 years - 7.90%
Senior citizen additional interest: 0.35%-0.50%
6. Muthoot Capital Services Limited
Credit rating: CRISIL - A+/Stable
Highest rate slab: 8.38%
Interest rates:
1 year - 7.21%
3 years - 8.07%
5 years - 8.38%
Senior citizen additional interest: 0.50%
7. ICICI Home Finance
Credit rating: CRISIL - AAA/Stable, ICRA - AAA/Stable, CARE - AAA/Stable
Highest rate slab: 7.80% (tenure: 39 months, 45 months)
Interest rates
1 year - 7.25%
3 years - 7.75%
5 years - 7.75%
Senior citizen additional interest: 0.25%
8. Can Fin Homes Ltd
Credit rating: ICRA - AAA/Stable
Highest rate slab: 8%
Interest rates
1 year: 6.50%
3 years - 8%
5 years - 6.75%
Senior citizen additional interest: 0.25%-0.50%
9. Bajaj Finance Limited
Credit rating: CRISIL - AAA/Stable, ICRA - AAA/Stable
Highest rate slab: 8.60% (FD of up to Rs 25,000), 8.40% (FD of above Rs 25,000)
Tenure: 42 months
Interest rates: 1 year - 7.60% (FD up to Rs 25,000), 7.40% (FD above Rs 25,000)
3 years - 8.30% (FD up to Rs 25,000), 8.10% (FD above Rs 25,000)
5 years - 8.30%
Senior citizen additional interest: 0.40%
10. LIC Housing Finance Ltd
Credit rating: CRISIL - AAA/Stable
Highest rate slab: 7.75%
Tenure: 3 years, 5 years
Interest rates
1 year - 7.25%
3 years - 7.75%
5 years - 7.75%
Senior citizen additional interest: 0.25%
Risks to consider
While corporate FDs can offer higher returns, they also come with risks that investors should weigh carefully.
“The primary concern is credit risk, where the issuing company may default on interest or principal payments if it faces financial issues,” said Shetty. Unlike bank FDs, which are typically insured, corporate FDs do not have the same level of protection.
Credit risk – If the issuing company runs into financial trouble, it may not meet its repayment obligations.
Liquidity risk – Some corporate FDs impose restrictions on early withdrawal or charge penalties, making it harder to access funds before maturity.
Lack of insurance – Unlike bank deposits, corporate FDs are not covered by deposit insurance, leaving investors exposed in case of default.
Evaluating corporate FDs
Investors can assess the safety of a corporate FD by checking its credit rating. Agencies like Crisil, ICRA, and CARE assign ratings that indicate the company’s financial stability and repayment ability.
AAA or AA – Considered low risk, with a strong likelihood of repayments.
A or BBB – Indicates moderate risk, with some exposure to market fluctuations. BB or below – A higher-risk category, where defaults are more likely.
Credit ratings provide a useful guide, but investors should also research the issuing company’s financial health before committing funds.
Tax implications
Interest earned on corporate FDs and fixed deposits from HFCs is taxable based on the investor’s income tax bracket. Tax is payable only if the total interest income from such deposits exceeds RS 5,000 in a year.