What makes Company Fixed Deposit better than bank FD?
Napoleon Hill, one of the greatest self-help authors in history once said, “Money without brains is always dangerous”.
Napoleon Hill, one of the greatest self-help authors in history once said, "Money without brains is always dangerous". While the quote has, and will, stand the test of time, it also highlights the importance of being prudent with one's financial resources. This year, in particular, is a testament to how financial planning can help one survive, and sail through the rough waters, especially when the economy comes to a near stand-still.
It wasn't the first time the world witnessed an economic calamity. Whether we talk about the Great Depression a century ago, the global economic crisis during the Second World War, or the financial crisis of 2007-2008, we have all been here before. Investors are often waiting for the right time to create wealth, and brace themselves to make the most of the market upturn. However, most of us fail to have a contingency plan, and those of us that do are able to weather the storm.
One of the most popular, and traditionally safer avenues to ensure capital safety is fixed deposit. Investors have long preferred fixed deposits to park their corpus, as FDs provide guaranteed returns. Furthermore, fixed deposits are not influenced by market movements, which makes them the ideal investment instruments at times of uncertainty and economic instability.
What are company FDs?
Similar to banks, other non-banking financial companies (NBFCs) are allowed to collect deposits from investors for fixed tenures, at set interest rates. These deposits are termed as company FDs, and like fixed deposits offered by traditional banks, company FDs also assure guaranteed returns, along with the option to choose the tenure. Furthermore, corporate fixed deposits usually offer higher FD interest rates, as compared to traditional bank fixed deposits.
Company FDs vs. Bank FDs
Company FDs offer several advantages over fixed deposits that are offered by traditional banks. Some of these include:
Higher interest rates
The interest rates offered by NBFCs are usually 50-100 bps more than what traditional bank FDs offer. An example for that is the Bajaj Finance online FDs, which provide up to 7.35 percent interest rates. These are some of the highest FD interest rates in India, which once again highlights the allure of company FDs.
The table below shows the difference between interest rates offered by Bajaj Finance fixed deposit schemes, in comparison with interest rates offered by other NBFCs on average, along with traditional bank FDs. Let us assume that you want to invest Rs. 30,00,000 for a period of 5 years. Here is how much you can expect your corpus to grow over the 60-month period.
|Fixed Deposit Type||Investment (Rs.)||Interest (%)||Interest Earned (Rs.)||Maturity Amount (Rs.)|
|Bajaj Finance Online FD (Non-Senior Citizen)||30,00,000||7.2||12,47,126||42,47,126|
|Traditional Banks (Non-Senior Citizen)||30,00,000||6||10,40,565||40,40,565|
|Other NBFCs (Non-Senior Citizen)||30,00,000||6.5||11,41,259||41,41,259|
Note: ROI in the above calculator may vary upto 4 bps with the actual rates offered
You can calculate how much wealth you can accumulate through Bajaj Finance FDs by using the FD interest calculator.
Flexible Payment Terms
Company FDs like Bajaj Finance FDs offer flexible payment terms. You can invest in an FD scheme with as little as Rs. 25,000, or through Systematic Deposit Plan (SDP), with just Rs. 5,000 per month. Furthermore, you can either invest in a cumulative FD scheme, or a non-cumulative FD scheme depending on your needs and requirements.
Why Bajaj Finance FDs?
Bajaj Finance FDs are backed by the highest safety ratings, from two of the most reputed credit rating agencies in the country, with an FAAA rating from CRISIL and MAAA rating from ICRA, thus assuring lowest credit-risk and highest degree of safety. Furthermore, Bajaj Finance Limited also boasts of a zero-default experience, as the maturity amount gets directly deposited into the investor's bank account.
Thus, higher interest rates, assured returns, flexible payment terms and interest payout options, along with guaranteed safety of your corpus are just some of the reasons by company FDs, such as Bajaj Finance fixed deposits are better than the schemes offered by traditional banks.