How Do Bank FDs compare with Corporate FDs| North Loop Official Blog
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03 Jul 2020

How Do Bank FDs compare with Corporate FDs

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What are the first words that come to your mind when you hear the word ‘money’? Is it saving, investing, or budgeting? If you are a keen manager of your finances, there are some golden rules you must follow. One of the most important ones amongst those is – setting aside enough savings for a rainy day.
Personal finance is about meeting personal financial goals, which is why without adequate savings and smart investments, it can become difficult to plan for short-term financial needs, your higher education, or even retirement. Saving money and investing can help you become financially secure and also provide a safety net in case of emergencies. The sooner you start, the better, but it is never too late to create financial goals to give yourself and your family financial security. However, the financial market has several savings as well as investment tools, and choosing the right one that suits your needs can sometimes become overwhelming.
That is the reason we have picked out one of the most common and popular choices of saving instruments that is Bank Fixed Deposits to help you understand its features and differences as compared to Corporate Fixed Deposits.

Bank Fixed Deposits –

Bank Fixed deposits are a regular income source of investment and are one of the oldest and safest investment instruments provided by the banks. The interest rates on fixed deposits are higher than interest provided on savings or current account balances, and this is one of the main reasons that most of you prefer to diversify your portfolio by investing in Fixed Deposits.
Moreover, banks do not insist on you becoming a saving account holder before investing in fixed deposits, and the FD account in most banks can get created by submitting a series of documents along with the application form. However, with North Loop, you can sign up for an FD account in a matter of 5 minutes and even get loans on your FD in 24 hours. It also offers an industry-high rate of 7.50% on its Fixed Deposits. The interest rates offered by other banks (2.75% and 5.50%) depend on a variety of factors like the amount deposited and the term of the investment.
Bank Fixed Deposits are best suited for those of you who are risk-averse investors as there is minimal risk involved in this type of investment. Moreover, it is a fairly liquid investment and can be broken by you as and when required.
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Corporate Fixed Deposits –

These are Fixed Deposits that are offered by corporate companies. They work in the same manner as the regular bank fixed deposits but do have some noticeable differences. They offer a higher rate of interest as compared to bank fixed deposits, and the risk involved is also much higher as compared to bank FDs. The risk of default is a possibility here as the company offering the fixed deposits may become unable to return your maturity amount at the time of maturity. That usually happens when the company has gone bankrupt or has become hit by the recession. While bank FDs can give you deposit insurance coverage up to a certain amount, corporate deposits do not provide this benefit. That is the reason investing in company deposits can be risky during times of economic stress. Institutions and companies with poor financial health and high NPA’s can face difficulty in servicing their debt obligations. Therefore, while the returns offered by corporate FDs may be higher, you should invest in them after thorough research.
Moreover, unlike Bank FDs, to apply for Corporate Fixed Deposits, you have to avail of the application forms either from the company’s official website or at the company itself. The tenure period of a company fixed deposit is also different and usually ranges between 1-3 years.
In terms of taxation, both fixed deposits from banks and companies get treated similarly. The interest from Fixed Deposit investments are added to your income and taxed at the slab rate applicable to you.

Conclusion –

Overall, bank and company fixed deposits have a lot in common. However, the former is undoubtedly a safer option and also provides a higher tenure.
To invest in a bank FD (at a rate of 7.50%), you can sign up with North Loop. To know more about the other benefits offered by us, click here.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.