Executive Summary – Individual investors can make investments in Bank FDs or Company FDs. Bank FDs are safer and less risky compared to Company FDs. Company FDs offer a higher interest rate. You can invest in Bank FDs anytime but companies offer FDs for investment only when they require funds. It is best to invest in Company FDs that are rated high by rating agencies like CRISIL, CARE or Fitch.
We can deposit money in a bank in a fixed deposit account (Bank FD). This is a popular investment option. Similarly deposits in companies by individual investors for a fixed term and predetermined rate of interest are possible. These are company fixed deposits (Company FD). Let us look at the similarities and differences between Bank Fixed Deposits and Company Fixed Deposits.
Features |
Bank FD |
Company FD |
Definition |
They are fixed income instruments issued by banks wherein you deposit money in a FD account for earning interest.
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They are fixed income instruments issued by companies and NBFCs when they want to raise funds. Individual investors can invest in these FDs and earn interest.
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Interest Rate |
Interest rate varies depending on the tenure of the fixed deposit. It is usually lower than the interest rate on company FDs.
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Interest rate is usually around couple of percentage points higher than interest on Bank FDs.
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Risk Factor |
It is safe investment generally. Deposits up to Rs. 1,00,000 are insured against insolvency of the bank.
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It is a more risky investment as there is no guarantee or insurance on the deposits.
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When can you invest ? |
You can open a FD account anytime with a bank.
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Companies allow investors to invest in company FDs at certain times only.
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Tenure |
Tenure can be as short as 7 days and as long as 3 years.
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These investments are usually for a tenure of 1-5 years.
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Taxation |
Interest will be charged as per the tax slab that you fall into.
TDS is deducted only if interest income > Rs.10,000 per year. There are concessions available for senior citizens. There are specific tax saver deposits that qualify for deduction under Section 80C |
Interest will be charged as per the tax slab that you fall into.
TDS is deducted only if interest income > Rs.5,000 per year. |
Importance of Rating |
FDs of PSU banks and top private sector banks are generally considered a safe investment option.
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It is important to understand the rating of the company FD. It is better to invest in company FDs with CRISIL rating of FAAA (Highest Safety) or Fitch rating of TAAA or CARE rating of AAA.
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You should avoid investing in companies that
– Offer very high interest rates.
– Are running in loss.
– Small private limited companies or partnership firms as it is difficult to evaluate how well they are doing.
You can invest in company deposits that have a high CRISIL, Fitch or CARE rating as interest rate is higher than bank FDs and it helps in investment diversification. The rating depends on degree of safety and timely payment of interest and principal. Let us know if you deposit in company FDs and in which company FDs have you invested in.
– Offer very high interest rates.
– Are running in loss.
– Small private limited companies or partnership firms as it is difficult to evaluate how well they are doing.
You can invest in company deposits that have a high CRISIL, Fitch or CARE rating as interest rate is higher than bank FDs and it helps in investment diversification. The rating depends on degree of safety and timely payment of interest and principal. Let us know if you deposit in company FDs and in which company FDs have you invested in.
Here is a comparison of current Company FDs and Bank FDs –
Organization |
Tenure |
Interest Rate |
Details |
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HDFC Bank
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1 Year
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8.75 %
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Large Private Sector Bank. Interest is compounded quarterly.
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Yes Bank
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1 Year
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9.00%
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Private Sector Bank. Interest is compounded quarterly.
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Punjab National Bank
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1 Year
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9.00%
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Public Sector Bank . Interest is compounded quarterly.
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HUDCO
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1 Year
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9.15%
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TAAA by Fitch. FDs are available for different tenures.
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Mahindra & Mahindra Financial Services Ltd.
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1 Year
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9.25%
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Company FD. Rated FAAA by CRISIL. FDs are available for different tenures.
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