If you’re planning to invest your money safely and want fixed returns, you’ve probably looked into Fixed Deposits (FDs). But did you know there’s more than just one kind?
While most people are familiar with bank FDs, there's another option that offers higher returns — the Corporate FD. But with higher returns comes higher responsibility (and a bit more risk). So how do you choose between a Corporate Fixed Deposit and a Normal Bank Fixed Deposit?
Let’s break it down in a simple and practical way.
What Is a Normal Fixed Deposit?
A normal or bank fixed deposit is the traditional FD that you open with a bank — public, private, or cooperative. You deposit a fixed amount of money for a specific tenure, and the bank pays you a fixed rate of interest. It’s stable, safe, and predictable.
You can choose how long you want to invest — from a few days to several years — and your interest is either paid regularly (non-cumulative) or at maturity (cumulative).
Why people love it:
Low risk – your money is safe.
Guaranteed returns.
Backed by RBI regulations and deposit insurance up to ₹5 lakh.
What Is a Corporate Fixed Deposit?
A corporate FDs works in a similar way, but instead of a bank, you’re investing with a company or NBFC (Non-Banking Financial Company). These are typically used by companies to raise working capital.
Since they’re not banks, they usually offer higher interest rates to attract investors. However, corporate FDs are not insured and carry more risk, so they’re best for investors who are comfortable with that trade-off.
Why people consider it:
Higher interest rates — often 1% to 2% more than bank FDs.
Good option for diversifying fixed-income investments.
Flexible tenures, just like bank FDs.
Key Differences: Corporate FD vs Bank FD
Let’s compare the two side by side:
| Feature | Bank Fixed Deposit | Corporate Fixed Deposit |
|---|---|---|
| Issuer | Banks (Public/Private) | Companies / NBFCs |
| Interest Rate | Moderate (6%–7.5%) | Higher (up to 9% or more) |
| Risk Level | Very Low | Moderate to High |
| Regulation | RBI-regulated, insured up to ₹5 lakh | Regulated, but no deposit insurance |
| Returns | Fixed and secure | Fixed but depends on issuer's financial health |
| Credit Rating | Not applicable | Important to check (look for AA or above) |
| Liquidity | High, with premature withdrawal option | May have lock-in or penalties |
Which One Should You Choose?
Now comes the real question — which one is better for you?
Choose Bank FD if:
You are risk-averse and want capital protection.
You are a senior citizen looking for stable monthly or quarterly income.
You’re investing for short-term goals like an emergency fund, travel, or education.
Choose Corporate FD if:
You are okay with moderate risk for better returns.
You want to diversify your fixed-income portfolio.
You’ve researched the company and its credit rating is high (AA or AAA).
You don’t need high liquidity and can stay invested for the full tenure.
Tips for Investing in Corporate FDs
If you’re leaning toward corporate FDs, here are a few tips to keep it safe and smart:
Check the credit rating – Only invest in companies rated AA or above by agencies like CRISIL or ICRA.
Avoid unknown companies – Stick to reputed NBFCs or corporates with a proven track record.
Don’t put all your money in one FD – Spread your investment across different companies and tenures.
Understand the terms – Read about premature withdrawal rules, lock-in periods, and penalties.
Keep track of maturity – Unlike bank FDs that can auto-renew, corporate FDs usually require manual reinvestment or payout instructions.
Final Thoughts
Both Corporate FDs and Bank FDs can be great tools for stable income and low-risk investing — but they serve different purposes.
If you’re looking for safety and peace of mind, a bank FD is your go-to. But if you’re okay with a little more risk and want higher returns, a carefully chosen corporate FD can give your savings that extra boost.
As always, the key is balance. You don’t have to choose just one. Many smart investors build a portfolio of FDs, mixing both types to get the best of both worlds — safety from bank FDs and higher returns from corporate FDs.
So the next time you're planning an FD investment, ask yourself: Do I want more safety or more return? And make the choice that matches your financial goals.