If you are looking for higher interest rates on fixed deposits (FDs), corporate fixed deposits from non-banking financial companies (NBFCs) and housing finance companies (HFCs) can be seen as an attractive option. These deposits offer higher returns when compared to major private and public sector banks. However, it is crucial to assess the risks involved before investing.
A key method to evaluate the risk is by examining the credit ratings assigned by rating agencies such as CRISIL, ICRA, and CARE. These agencies evaluate the financial health of the NBFC or HFC issuing the corporate FDs, and their ratings reflect the likelihood of default on interest and principal repayments.
Higher-rated corporate FDs are generally safer, with lower chances of defaults. Therefore, it’s important for depositors to carefully study these ratings to make informed decisions.
Here are some corporate fixed deposits that currently offer the best interest rates:
Factors to consider before investing in corporate fixed deposits
When investing in corporate fixed deposits, it is essential to consider several key factors to make informed decisions. First and foremost, check the credit rating of the issuer, as choosing corporate FDs from companies with high credit ratings minimises credit risk.
Next, think about the tenure of the fixed deposit and ensure it aligns with your financial goals to match your investment period with your future financial needs. Comparing interest rates and payout frequencies among different companies is crucial to select the best return that suits your requirements.
Additionally, you may check if there is any lock-in period before investing, particularly if you might need access to your funds before maturity. Be mindful of the tax implications, especially if you are in a higher tax bracket, since the interest earned is taxable and can affect your net returns.
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Lastly, consider diversifying your portfolio by investing in a mix of corporate FDs and other low-risk instruments to manage risk effectively. By keeping these factors in mind, you can achieve a balanced approach to your investments while maximising potential returns.
