Corporate fixed deposits: how they work, how safe they are and how they differ from bank FDs

A corporate fixed deposit, also called a company fixed deposit, is money you lend to a company that is not a bank. It runs for a fixed term at a fixed rate. Unlike a bank FD, it carries no deposit insurance. Getting your money back rests on the company's ability to repay, which a credit rating tries to measure.

What is a corporate fixed deposit?

A corporate fixed deposit is a deposit with a company other than a bank. Two kinds of company matter most: the NBFC and the housing finance company.

An NBFC (non-banking financial company) is a finance company that is not a bank. It must be registered with the Reserve Bank of India (RBI), and RBI's guidance says it also needs specific authorisation to accept deposits from the public. Without that, it cannot offer you an FD.

A housing finance company (HFC) lends for housing. One that takes deposits is registered with RBI under the National Housing Bank Act, 1987.

Deposits with other companies follow the Companies Act rules instead. Such a company must get a credit rating every year while its deposits run.

A deposit with a bank is a bank FD, explained in what is a fixed deposit. This page is about deposits that companies take from the public.

How is a corporate FD different from a bank FD?

The biggest difference is deposit insurance. Bank deposits are insured up to ₹5,00,000 per depositor per bank. Corporate FDs are not insured at all.

TDS is tax deducted at source, before interest reaches you. The insurer is the Deposit Insurance and Credit Guarantee Corporation (DICGC), which covers commercial banks and eligible co-operative banks. NBFCs and companies are not on its list. The rest of the comparison:

For how bank FDs hold up, see how reliable are fixed deposits.

Is a corporate FD safe?

A corporate FD is only as sound as the company's ability to repay, because no deposit insurance stands behind it. RBI requires an NBFC's deposit adverts to say the deposits are not insured. RBI itself does not stand behind repayment of NBFC deposits.

RBI does set protections. They reduce risk but do not insure you.

• An NBFC must hold at least BBB- on its deposits, renewed at least once a year.
• If the rating falls below that, it must immediately stop taking fresh deposits and renewals. Existing deposits run to maturity.

Stopping new deposits does not repay old ones. See also safest investments with high returns.

If the company does not repay

Complain to the company first. For an NBFC, you can then go to the RBI Ombudsman, the complaint office RBI runs. Under the scheme in force from 1 July 2026, you can do that after 30 days without a reply. Or go within 90 days of a reply that does not satisfy you. HFCs are outside that scheme. An HFC's application form must tell you that you may approach the National Housing Bank, and may apply to its authorised officer for non-repayment.

An NBFC's form also names the company law tribunal (NCLT) for non-repayment, and the consumer forums for poor service. None of this is a promise of repayment.

What does a credit rating on a corporate FD tell you?

A credit rating is a rating agency's opinion of how likely a company is to repay in full and on time. A rating agency is a firm registered with SEBI that grades borrowers. RBI accepts deposit ratings from any SEBI-registered agency.

On SEBI's long-term scale, AAA means the lowest credit risk, AA very low, A low and BBB moderate. Below that come BB, B, C and D, where D means in default or expected to be soon. A "+" or "-" shows standing within a grade. The full scale is in corporate bonds and NCDs.

BBB- is the lowest investment grade, the lowest rating RBI allows for an NBFC or HFC deposit. The application form must print the rating and the agency's name. A rating is an opinion, not a recommendation. It does not measure how easily you can get your money out, and SEBI's investor site says ratings can change quickly.

Then there is the rate. SEBI's investor guide explains, for bonds, that companies with poor ratings may offer higher rates to offset the higher risk. The same logic is why a deposit rate well above what other companies pay deserves a second look. RBI also caps it: no NBFC or HFC may pay more than 12.5% a year.

What tenures and payout options do corporate FDs have?

An NBFC or HFC deposit must run at least 12 months and at most 60, and cannot be repayable on demand. That is the tenure, how long the deposit runs. Within that window, exact tenures are the company's choice. Interest may be paid out or compounded, but not at intervals shorter than monthly. Compounded means the interest is added to the deposit and earns interest too; a cumulative deposit pays it all at maturity. Try the fixed deposit calculator, or read about monthly interest on a fixed deposit.

At maturity:

• The company must tell you the details at least 14 days before.
• It cannot renew without your express consent.
• If you do not claim a matured NBFC deposit, it need not pay interest for the gap unless you renew from the maturity date. Once you claim, any delay earns you interest at the deposit's rate.
• An HFC deposit with no maturity instruction is paid to the designated bank account.

You can hold a deposit jointly, with clauses such as "Either or Survivor". You can name one nominee, the person who receives the money if you die.

Can you withdraw a corporate FD before it matures?

Not in the first three months, except on the depositor's death or a listed emergency. During this lock-in, when you cannot take the money out, an NBFC or HFC may neither repay early nor lend against the deposit.

On death, the company must repay the joint holder, nominee or legal heir. The emergencies are a medical emergency or a notified natural calamity. These emergency repayments carry no interest:

• A tiny deposit (total deposits of up to ₹10,000 in one name) in full.
• Other deposits: up to 50% of the principal or ₹5 lakh, whichever is lower.
• In critical illness: up to 100% of the principal.

After three months, early repayment is at the company's discretion or, where the terms allow, at your request. Interest is where NBFCs and HFCs differ. The examples assume ₹1,00,000 in a 3-year deposit at an assumed 8%, with an assumed 7.5% rate for a 1-year deposit.

An NBFC deposit

From three to six months, an NBFC pays no interest. After six months, it pays 2 percentage points less than the rate for the period the deposit has run.

Close after one year: 7.5% less 2% is 5.5%, so ₹5,500 before tax. Close after four months and you get ₹1,00,000 back with no interest.

A housing finance company deposit

From three to six months, an HFC pays up to 4% a year to an individual, and nothing to other depositors. After six months, it pays 1 percentage point less than the rate for the period run.

Close after one year: 7.5% less 1% is 6.5%, so ₹6,500 before tax. Close after four months and it is at most 4% a year for four months, about ₹1,333.

After the lock-in, an NBFC may lend up to 75% of the deposit, at 2 percentage points above the deposit rate. For loans against FDs in general, see loans against fixed deposits; for breaking a bank FD, see penalty on premature withdrawal.

How is interest on a corporate FD taxed?

The interest is added to your income and taxed at your slab rate, the rate for your income band, like bank FD interest. TDS starts much lower. A company deducts 10% once the interest it pays you passes ₹10,000 in a tax year, with no higher limit for senior citizens. The limit is per company, per tax year. Without a valid PAN, TDS is 20% or more.

Say you put ₹2,50,000 in a company FD paying interest yearly at an assumed 8%. That is ₹20,000 a year, above ₹10,000, so a resident individual with a PAN has ₹2,000 deducted. The same ₹20,000 from a bank FD is below ₹50,000, so the bank deducts nothing. Either way, the full ₹20,000 is taxable at your slab rate. TDS is not the tax itself; see income tax return.

Form 121 is a declaration asking the payer not to deduct TDS. It works for company deposits too. Under 60, two tests apply. First, your tax on the whole year's income must be nil after deductions and rebate. Second, the income you declare on your Forms 121 must itself be within the basic exemption limit. At 60 or older, only the first test applies. It covers one tax year, so give it again each April, to each payer.

Section 153 (the old Section 80TTB) names only banks, co-operative banks and post offices, so a senior citizen's company FD interest gets no deduction under it. See tax-saving investments for senior citizens. Nor is a corporate FD a tax-saving FD. Section 123 (the old Section 80C) needs a term deposit of at least five years with a scheduled bank, under the old regime only. See tax-saving fixed deposits and taxation on fixed deposits.

What should you check before booking a corporate FD?

Check that the company is registered with RBI and allowed to take deposits, then its deposit rating today and what getting out early costs.

• RBI's list of registered NBFCs, and the company's certificate of registration.
• The kind of company: NBFC, HFC or another company.
• The rating, the agency and the date, printed on the application form.
• That the deposit is not insured.
• The tenure against when you will need the money, given the three-month lock-in.
• The early-exit rate, which adverts must state.
• Whether interest is paid out or added to the deposit, and why the rate is higher than others on offer.
• How much sits with one company; see spreading your fixed deposits.

Koshex offers fixed deposits, both bank and corporate, from ₹10,000. See the fixed deposit page. Only the bank deposits are insured, up to ₹5 lakh per depositor per bank. For deposits aimed at older savers, see senior citizen fixed deposits.