Fixed deposits is a saving instrument. they earn the investor a higher rate of interest than a regular savings account. It is a term deposit wherein the investor invests a huge amount of money at once and earns interest at regular intervals until the date of maturity.
Fixed deposits are mainly offered by banks and NBFCs. But what majority of people are not aware of is that fixed deposits are offered by companies too. Though the fixed deposits which some companies offer are not the same with the fixed deposits offered by the bank.
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Both banks and companies offer fixed deposit. Therefore, bank fixed deposits and corporate fixed deposits are the two types of fixed deposits that we have. As we read further, we will know more about Corporate fixed deposits and Bank fixed deposits.
BANK FIXED DEPOSITS
Fixed deposits were first offered by the banks before other financial institutions and corporate companies followed. Most of the banks don’t insist on the customer being a savings account holder in the bank though being a savings account holder in the bank will entitle you to many perks. Customer who want to open a fixed deposit account with the bank can do that either online or at one of the bank branches.
To apply for a fixed deposit in a bank, the customer has to submit the application form along with few documents which contains some means of identification. The rate of interest which a bank will offer will be different from that of another bank. It also depends on the amount deposited by the investor and the term for which it is invested. The fixed deposit account which banks offer usually required the investor to deposit a minimum amount of money into the account first. The rate of interest offered for bank fixed deposits is average and the longer the term the higher the interest which will be offered.
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The bank fixed deposits are better operated for low risk investors because there is not much risk involved in this investment.
CORPORATE FIXED DEPOSITS
This type of fixed deposits are usually offered by corporate companies. The corporate fixed deposits work like the regular bank fixed deposits with only a few changes. Corporate fixed deposits offer a higher interest rates when compared to bank fixed deposits as there is a high risk involved when it comes to corporate fixed deposits. The targeted customers of corporate fixed deposits include large commercial companies, public institutions, government agencies and large non profits. It is different from retail deposits which are held by consumers and business.
There is no difference between Applying for a corporate fixed and applying for a bank fixed deposit. The only difference here being that one should avail the application form either from the company’s official website or at the company itself. The risk with company fixed deposits is much higher than that off bank. There is the default risk where the company might not be able to return the maturity amount to the customer at maturity.This usually happens when the company has gone bankrupt or has been hit by the recession. The tenure period for the deposit to a corporate fixed deposit ranges between 1-3 years.
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DIFFERENCE BETWEEN BANK FIXED DEPOSITS AND COMPANY FIXED DEPOSITS
Corporate Fixed Deposits are FDs offered by corporates. Their functioning is somewhat similar to Bank FDs but they are offered with higher rate of interest. The risk involved with corporate FDs are significantly higher. If the company hits recession or goes bankrupt then the returns cannot be provided at the maturity of corporate FDs.
Bank fixed deposit
Offered by Bank
Rate of interest: Average
Tenure period: Ranges from months to years.
Risk involved: Low
Medium of investment: Certificate of deposit.
Corporate fixed deposit
Offered by: Corporate company
Rate of interest: High
Tenure period Ranges: 6 months to 3 years
Risk involved: High
Medium of investment: Certificate of deposit