Avoid locking into corporate FDs of longer tenures, say analysts

Deterioration risk in credit profile increases, and better rates may become available a year later

Bank fixed deposit (FD) rates have come down over the past few years. State Bank of India, for instance, offers rates of 2.9-5.4 per cent (3.4-6.2 per cent to senior citizens) for tenures ranging between 7 days and 10 years. With returns from bank FDs failing to beat inflation, investors are looking for better alternatives. Currently, several AAA-rated company FDs are available that offer returns of up to 8.25 per cent.

Higher returns

Company FDs are popular among many fixed-income investors because they offer better rates.

Sahil Arora, senior director, PaisaBazaar, says, “They usually offer higher interest rates than bank FDs.” They also