Give priority to safety, do not chase high returns in company FDs

In the current stressed credit environment, give higher priority to safety of capital by sticking to the highest-rated instruments

When retail investors wish to earn better returns than those offered by bank fixed deposits (FDs), one instrument they turn to is company FDs. However, in the current environment of high credit stress, they need to be very selective when opting for these products. 

Company FDs are unsecured instruments, offered by both manufacturing companies and non-banking financial companies. “Returns offered by company FDs can be 100-250 basis points higher than those offered by bank FDs across tenures,” says Navin Chandani, chief business officer, BankBazaar. 

The simplicity of the product makes it attractive to investors who prefer fixed returns over market-linked