Company FD or Bank FD – Which is good for you?

Insurance and Finance

Mr. Subhash Verma, a Railway employee, earned hard to give his family a better life. In his tenure of employment, he managed to save some amount of money for his daughter’s marriage who is working as a Financial Advisor for an MNC.

With the growing age and increasing responsibilities, his worries for the future needs also increased. He was very much sure that he had to invest his money into an FD, but was still confused regarding where to invest – Into a company FD or a bank FD!

He discussed this confusions and worries with his daughter and asked her to help him out in choosing the better FD scheme. She researched the market and helped her father by differentiating between bank FD and company FD.

She explained the following features and benefits of a Company Fixed deposit to her father :

  • Company FD is the fixed deposit service that is offered by Non-banking finance companies(NBFCs).
  • They give higher interest rate as compared to a Bank FD.
  • They carry low risk and are hassle-free to proceed.
  • The deposit scheme runs same as that of any other deposit scheme.
  • The interest rate remains fixed and remains unaffected by the market forces
  • You get the opportunity to choose your tenor or maturity term.
  • This account allows you to withdraw the money before maturity. It takes a nominal penalty for liquidation.
  • A company FD offers both cumulative and non-cumulative interest pay-outs. You can choose the one you want.

While explaining the features and benefits of a Bank FD, she mentioned the following points:

  • Registered private and state banks offer this fixed deposit scheme.
  • Due to the high level of security to the account, the interest rate on these deposits are lower.
  • Banks that offer these FD follows strict terms and rules. These regulations make premature withdrawal difficult.
  • You may have pay higher amount as a penalty for premature withdrawal.
  • These are also divided into cumulative and non-cumulative FD.
  • Banks give privilege to customers who already have a saving account with the bank.

By this, she made a clear difference between the two. She suggested her father to firstly study the market and look for various options of the FD available. Further, she added to evaluate and prioritize all his need and then review the options available along with the interest rates.

Mr. Verma did what her daughter asked him to do. He investigated the market thoroughly and made a list of his probable future needs. After analyzing, reviewing and putting everything together, he was clear with the idea of where to invest his savings.

The Bottom Line

Based on your needs you can choose between any one of the two. Both bank FD and company FD are good in their way. But, if you want to earn higher returns from the savings, then you should choose to invest in company FD.