Corporate Deposits

Corporate Deposits refers to deposits by an investor or an institution with another financial institutions which can be a bank or an NBFC.

The corporate deposits can further be classified into two categories which are Company Fixed Deposits and Inter Corporate Deposits (ICD).

• Company fixed deposit: It refers to deposits by an investor with a financial institution.
• Inter corporate deposits: It refers to deposits by a company with another company.

The major filters that impact one’s selection of Corporate Deposits are:

• Tenure
• Rate Of interest
• Credit rating

Tenure: Corporate deposits can be short term, middle term and long term in nature. Inter Corporate Deposits fall under the category of short term finance and cannot exceed 1 year tenure. Generally ICD are taken for 90 days.

Rate of interest: The rate of interest offered by a company on deposits differs for Company fixed deposits and ICD. The rate offered in ICD can be for 1 day also. Though RBI has set limits for the interest rate offered by these firms

Credit Rating: Credit rating of the firm is the largest factor deterring the ROI offered by the firm. A firm with AA or AAA generally offer less ROI and a firm with lower ROI offer higher ROI.

Precaution is essential while investing in Corporate Deposits. The history is full of instances when the companies have defaulted on payment of interest or repayment of principal or both. For eg Kingfisher, Sahara etc. The interest earned on corporate deposit is tax deductible.

ICD is a source of finance for firms for short term credit. Retail investor is not allowed to invest in ICD.

Though he can go for corporate fixed deposits. Corporate fixed deposits are offered by Financial instituitions like ICICI, Shriram Group, Muthoot Finance etc.

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