FD Tips: Useful information for those who invest in FD, before investing know the difference between bank FD and corporate FD..

Fixed deposits (FDs) are a reliable option for investors who want stability and fixed returns, as they offer financial security. However, FDs are not just limited to traditional bank deposits. Recently, corporate FDs have also emerged as a popular option.

Many investors face a dilemma while choosing between corporate FDs and bank FDs. While both are aimed at growing your savings, you should know some important differences between these two FDs before making a decision.

What is a bank FD?
Bank FD is a safe investment option where you deposit a lump sum amount for a fixed period. It offers guaranteed returns, and your principal amount remains safe, as it is considered low-risk. Banks offer different interest rates for different periods. Usually, your deposits are insured by DICGC up to Rs 5 lakh.

What is the meaning of Corporate FD?
Corporate Fixed Deposits (FDs) are offered by companies, where you deposit money for a fixed period and they pay you interest. Similar to bank FDs, but due to the higher risk in corporate FDs, the interest rates are also usually higher. This can be an option for investors who are looking for higher returns and are willing to take a little extra risk.

This FD does not have a guaranteed return by government agencies, so it is a bit risky. Therefore, you should carefully assess the financial position of the company before investing. Corporate FD is right for those who are willing to take more risk in exchange for potentially higher returns.

What is the difference between a bank FD and a corporate FD?
The interest rate in bank FDs is usually low. Talking about the safety of deposits, it is generally considered safe due to RBI rules and DICGC insurance up to Rs 5 lakh. In this, you can also get tax exemption on FDs with a lock-in period of 5-10 years. According to a report, a penalty of 1-2 percent interest is levied on premature withdrawal in bank FDs. The investment period in bank FDs ranges from 7 days to 10 years.

Bank FDs usually have low interest rates, but it is considered highly safe for deposits due to RBI regulations and DICGC insurance of up to Rs 5 lakh. You can avail of tax exemption on FDs with a lock-in period of 5-10 years. According to the report, a penalty of 1-2 percent interest may be levied on premature withdrawal. The investment period in this ranges from 7 days to 10 years.

Whereas, the interest rate in corporate FDs can be higher. Also, it can potentially give better returns. Talking about the safety of the deposited money, the risk in corporate FD is higher due to dependence on the financial support of the issuing institution. You do not get any tax exemption on investment in corporate FDs. Also, if you withdraw the money deposited in a corporate FD before the time, then 2-3 percent interest is charged. Investment in corporate FD can be made for 6 months to 5 years.

Conclusion-
Investing in bank FDs gives you guaranteed returns, and your money remains safe, even if the interest rates are slightly low. At the same time, high interest rates can be obtained in corporate FDs, but the risk of the money deposited in it is also high. The choice depends on your priority - safety or high returns.

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