State Bank of India offers its highest interest of 5.4% on FDs of five years and up to 10 years. Most company deposits provide at least one percentage points higher returns on long tenure FDs
Typically, when companies accept deposits, they offer higher interest rates than fixed deposits (FDs) from banks. According to the thumb rule, the higher the returns or interest rate than a bank FD deposit, the higher the risk.
State Bank of India offers its highest interest of 5.4% on FDs of five years and up to 10 years. Most company deposits provide at least one percentage points higher returns on long tenure FDs. Companies such as Shriram Transport Finance Co. Ltd and Shriram City Union Finance Co. Ltd offers over 7% rates for long-tenured FDs.
Most companies offer FDs for at least a year, unlike banks that accept FDs even for a few days. Except for two or three companies, the max tenure of company FD is usually five years. Companies may also have different rates for cumulative and non-cumulative deposits. There is a payout at regular intervals in the former, and in the latter, proceeds are paid on maturity.
Don’t just go by the credit rating of the company to choose one. Many NBFCs could have a strong parentage. Kerala Transport Development Finance Corporation Ltd, for example, is backed by the Kerala state government.
Some have a track record of decades. The management of some companies have been through economic different economic cycles and maintained a track record of payment to depositors.
Before investing, do remember that company deposits don’t have any guarantee if the company fails. Banks deposits come with deposit insurance for up to ₹5 lakh. If a bank fails, Deposit Insurance and Credit Guarantee Corporation pay them up to the specified amount. No such scheme exists for company deposits. The depositor can lose the entire capital.
