Are Corporate Fixed Deposits a Secure Investment Option?

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Indians have invested in fixed deposits (FDs) for several decades. An FD is one of the most popular and safe investment instruments. Traditionally, only banks used to offer FDs. The Reserve Bank of India (RBI) is responsible for the insurance of bank FDs.

Today, in addition to bank deposits, you may choose corporate deposits offered by non-banking finance companies (NBFCs) like Mahindra Finance. Before you invest in these, understand their functioning and advantages, and then make an informed decision.

Corporate Fixed deposits

Corporate fixed deposits are term deposits that provide a fixed rate of interest. They start with a pre-determined duration, which may vary from one NBFC to another.

Benefits of corporate FDs

  1. Higher interest

Generally, NBFCs offer high fixed deposit interest rates, which enables you to earn more returns on your investments.

  1. Flexibility

Corporate deposits offer cumulative, as well as non-cumulative schemes. Under the former scheme, the interest is added to your principal, allowing you to earn more through compounding. The non-cumulative scheme pays the interest at a regular duration, which may be quarterly, half-yearly, or annually. Therefore, you have the convenience to select a scheme as per your financial requirements.

  1. Credit rating

Every NBFC must get rated by a noted credit rating agency. The rating is based on various parameters and allows you to understand the risk of investing in a particular fixed deposit scheme.

Things to consider before investing in corporate FDs

  1. Understand the issuer

Corporate FDs have a slightly higher risk aspect, as these are unsecured investments. However, to mitigate some of these risks, you must choose deposits offered by reputed issuers who have a strong business and financial standing.

  1. Check the credit rating

An important advantage of corporate FDs is that they are rated by agencies. You can analyze the credit rating to determine the stability of the deposit and its risks before making any decision. For instance, the Mahindra Finance FD has an ‘FAAA’ CRISIL rating, which signifies a high level of safety.

  1. Compare different offerings

Several NBFCs offer different tenures and FD rates. Ideally, it is advisable to invest in deposits with higher interest, as they would prove beneficial. However, you can evaluate different offerings and terms and conditions to invest wisely.

Corporate deposits offer better returns, and including these in your debt portfolio is advisable. Check your fixed deposit eligibilityon the Mahindra Finance website and invest today.

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