Fixed deposits have served as a preferred investment option for Indians for generations. From vacation funds to retirement savings, FDs have been the go-to options for most investors who prioritise stable returns and capital safety. Due to the DICGC insurance cover of up to Rs. 5 Lakh, bank FDs are often the preferred choice of most investors. However, for better returns, investors can choose corporate FDs. Funds deposited into a corporate FD earn competitive interest at a predetermined rate for a fixed period. While corporate FD interest rates are higher than bank FDs, most investors often wonder if it is safe to invest in a corporate fixed deposit.

In this article, we highlight how corporate FDs are safe investment instruments that can help you earn high returns while ensuring capital preservation and zero market-linked risks.

• Corporate FDs are evaluated and rated by credit agencies to ensure low investment risk.
• Since corporate FDs are contractually guaranteed, they ensure safe and fixed returns.
• Corporate FDs are not only safe but also offer higher interest earrings and flexible investment tenures.

Corporate FDs are safe investment avenues since they are usually rated by credit rating agencies like CRISIL and ICRA. Fixed deposits rated AAA or higher indicate the highest level of safety for investors. For instance, the Bajaj Finance Fixed Deposit boasts a CRISIL AAA/Stable and [ICRA] AAA/(Stable) rating. This high rating indicates that the Bajaj Finance FD has a reliable history and a strong capacity to meet financial obligations towards investors. A solid credit rating makes corporate FDs low-risk investment options compared to stocks and other equity investments.

Still wondering if corporate FDs are safe investments? Here’s a list of 4 compelling reasons why corporate FDs are safe and why you should invest in them:

1. Surplus funds

When you have surplus funds, you can invest them in corporate FDs. Instead of letting your surplus funds sit idle, you can earn interest on the same while keeping them safe and easily accessible in a corporate FD account. You can invest your surplus funds in other investment avenues like stocks and other equity assets that offer relatively higher returns. However, this higher return potential is matched by higher risks as well. Corporate FDs are safe investment options that ensure better capital protection than market-linked instruments like stocks.

2. Higher returns

The higher returns from corporate FDs make them an attractive investment option for investors seeking to earn more on their deposited corpus. Corporate FDs offer a fixed interest rate on the deposit that’s generally higher than regular bank FDs. For instance, Bajaj Finance corporate fixed deposits offer attractive interest rates ranging up to 8.35% p.a. for regular citizens and up to 8.60% p.a. for seniors, ensuring profitable returns on your investment.

Most corporate FDs offer callable and non-callable FD interest. Let’s review each:

• Callable FDs allow the depositor to terminate the FD account before its agreed-upon maturity date, offering greater flexibility and liquidity benefits. In such cases, the principal amount and interest accrued up to the termination date is payable.
• Non-callable FDs do not allow withdrawals before the predetermined maturity date. Generally, these FDs also offer a higher rate of interest than callable FDs.

In a nutshell, corporate FDs are safe investment instruments that offer fixed and higher returns throughout the investment tenure.

3. Contractual obligations

For those wondering if it's safe to invest in a corporate fixed deposit, the answer is yes since corporate FDs are bound by contractual obligations. When you invest in a corporate FD, you enter into a contractual agreement with the institution which defines the details of your investment. This includes specifications about the amount invested, the FD tenure, the interest rate applicable, and penalties on premature withdrawal. In simple words, the highest FD interest rates offered by a corporate FD are guaranteed and protected by a legal contract. This clear and binding contract helps avoid misunderstandings, disputes, and legal liabilities. The legal agreement’s terms and conditions protect the invested funds while ensuring an agreed-upon return from the investment, making corporate FDs safe investments.

4. Flexible tenure

Corporate FDs are safe and lucrative investment avenues with flexible investment tenures. Most corporate FDs offer flexible tenures ranging from 7 days to 10 years. For instance, the Bajaj Finance corporate FD offers varied investment tenures ranging from 12-60 months to suit different investment needs and financial goals. In fact, Bajaj Finance also offers high interest rates for specific tenures to further enhance your returns on the investment. Flexible tenure options make corporate FDs best-suited for both short and long-term financial goals. For instance, if you have a short-term goal or anticipate needing the funds soon, you can invest in a 1-year corporate FD.

Alternatively, if you have a long-term goal or wish to diversify your portfolio with a fixed-income asset, you can choose a longer tenure that may offer a higher interest rate. In fact, you can leverage the flexible tenure feature of corporate FDs to ladder your investments with different FDs maturing at different time periods. This approach ensures that your liquidity needs are sufficiently met while also reducing the risk of missing out on potential interest rate hikes.

Corporate fixed deposits can be prudent additions to your investment portfolio, especially if you’re after capital protection and high returns. Compared to bank FDs, corporate FDs offer higher interest rates, making them lucrative avenues for depositing your surplus funds. Corporate FDs are safe investments as long as you check the credit rating of the company offering the fixed deposit before investing your hard-earned funds. Contractually bound corporate FDs from highly rated companies keep your investment safe, ensuring fixed and guaranteed returns throughout the agreed-upon investment tenure.