How to invest money wisely: Bank FDs vs. corporate FDs

If you are wondering where and how to invest your money, bank and corporate fixed deposits may be more favourable for your investment goals.

Fixed deposits (FDs) are one of the safest modes of investment for individuals seeking stable returns. Traditional bank FD investment offers an individual secure investment option, whereas corporate FDs have gained popularity, offering an alternative with distinct advantages.

This article will discuss the differences between these FDs, their features, benefits, and key factors to consider when choosing. 

Highlights:

• Bank FDs offer flexible tenures, income options, and safety, making them a staple in investment choices.

• Corporate FDs, provided by NBFCs, come with higher interest rates, flexible withdrawal terms, and ratings from credit agencies.

• When deciding between bank and corporate FDs, key factors include financial goals and interest rate trends.

What are the features and benefits of bank FDs?

Here are some key features and benefits of Bank FD investments:

• A flexible tenure, ranging from seven days to ten years.

• A choice of receiving returns at maturity or periodic intervals, providing income as required.

• FD investment with a bank is insured with the DICGC scheme, which covers your deposits up to Rs. 5 lakhs

• A tax-saving investment tool that provides additional benefits like preferential interest rates.

• In times of financial need, investors can avail of a loan against their bank FD investment. 

What are the features and benefits of corporate FDs?

Corporate FD investments are offered by NBFCs (Non-Banking Financial Companies). Here are some key features and benefits:

• Corporate FDs provide a higher rate of interest than bank FDs.

• More lenient lock-in periods and withdrawal terms than Bank FDs

• Such FD investment gets ratings from leading credit rating agencies, which reflects the investment's stability and credibility.

• Investors get enhanced services like simplified money investment features and digital provisions. 

• Some corporate FD issuers offer the option to avail of a loan against your FD investment.

Also Read: Best rates for corporate FDs

Where to invest money: Bank or corporate FD?

• Determine your financial goals: Corporate FDs are the best for short-term investment. If you want stability for long-term investments, opt for bank FDs.

• Evaluate the market and keep track of interest rate trends: Bank FD interest rates have declined recently, so lower interest rates may not keep pace with inflations. Corporate FDs can be a better option for higher returns.

• Review and compare: Ensure you thoroughly assess and compare all options, like tenure, lock-in periods, and penalties for both FDs.

Also Read: Mutual funds vs. FDs

Top Bank FD Rates and Corporate FD Rates

• HDFC Bank (4.50%-7%)

• ICICI Bank (4.50%-6.90%)

• Bank of Baroda (4.50%-6.50%)

• Mahindra Finance Ltd FD (7.40%-8.05%)

• PNB Housing Finance Ltd FD (Upto 7.70%)

• HDFC LTD FD (Upto 7.45%)

Conclusion

The choice between bank and corporate FD investments depends upon your investment goals, risk tolerance, and current market conditions. Both have pros and cons, making them valuable components of a diversified portfolio.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.

Find the latest articles on other investments here.