5 Corporate Fixed Deposit terminologies to know
- AssetPlus Editorial Team
- Jun 15, 2022
- 4 min read
Updated: Nov 25
Table of Content:
Introduction.
Five Important Corporate Fixed Deposit Terminologies.
Interest Rate.
Tenure.
Effective Yield.
Cumulative.
Non-Cumulative.
FAQs.
Introduction:
Investing can be simple when one understands the basics. The key aspects must be clear before making any financial decision. Often, lack of information and misinterpretation of details lead to unhealthy investment choices. In the case of Corporate Fixed Deposits, many investors struggle because several corporate fixed deposit terminologies sound technical or confusing. Multiple jargons for a single product create more confusion than clarity, causing investors to feel stuck even before they begin the actual investment process.
Five Important Corporate Fixed Deposit Terminologies
Here are the five important corporate fixed deposit terminologies that every investor must understand before opening a corporate FD account or making an investment decision:
1. Interest Rate:
Interest is the capital appreciation or profit earned over and above the principal amount invested. The rate at which the invested amount grows over a specific time period is called the interest rate, usually expressed in percentage terms. Corporate fixed deposit interest rates may be offered monthly, quarterly, semi-annually, or annually based on the options provided. Understanding this is one of the foundational corporate fixed deposit terminologies for all investors. 2. Tenure
Tenure refers to the time horizon for which the invested amount remains locked until maturity. It depicts the duration during which the investment earns a fixed rate of return. In general, shorter tenures tend to offer lower interest rates, while longer tenures may provide higher returns. This is one of the most important corporate fixed deposit terminologies for comparing different FD options. 3. Effective Yield The compounded growth rate of interest earned on the investment is known as the effective yield. It is calculated on an annual basis. This shows the actual year-on-year returns that which the corporate deposits deliver for the investors. For example, a savings-bank account gives roughly 2.5-3% interest per annum, whereas a corporate deposit could yield anywhere between 6% to 9.5% per annum for the same time period. 4. Cumulative An option wherein the interest is accumulated along with the principal amount as unrealized gains, and on maturity, it is paid out wholly to the investor. The interest rates are said to be higher in this option when compared to Non-Cumulative. This is usually opted for when a goal is achieved in a specific time horizon. 5. Non-Cumulative Another option wherein the interest is paid out in regular instalments, in a prescribed manner as per the frequency of payout mechanisms, and the principal invested capital does not have any appreciation or gains during maturity. The frequency of payouts is generally monthly/quarterly/semi-annually/annually. This is usually opted for when there is a requirement for periodic income or to create a source of regular earnings to meet routine expenses.
AssetPlus has recently launched attractive corporate fixed deposits by partnering with reputed companies like Shriram Transport Finance and Mahindra Finance. Various options are available to cater to distinct personal needs and can be customized as per requirements.
Understanding key corporate fixed deposit terminologies is essential for making confident and informed investment decisions. When investors clearly know what terms like interest rate, tenure, effective yield, cumulative, and non-cumulative options mean, they are better equipped to choose the right FD structure based on their financial goals. Corporate FDs can be a reliable fixed-income avenue, but clarity on these basic terms ensures you select an option that offers both safety and suitable returns.
By learning these foundational concepts, you can avoid confusion, compare different FD products effectively, and invest with greater confidence. Use the AssetPlus platform to compare corporate FDs, understand product features, and help investors make smarter fixed-income decisions.
FAQs:
What are corporate fixed deposit terminologies?
Corporate fixed deposit terminologies refer to the key terms such as interest rate, tenure, effective yield, cumulative option, and non-cumulative option. Understanding these helps investors evaluate how a corporate FD works and which option suits their financial needs.
Are corporate fixed deposits safe to invest in?
Corporate FDs can be safe if the issuing company has a strong credit rating from agencies like CRISIL, ICRA, or CARE. Investors should always check the company’s rating, financial stability, and past payout record before investing.
What is the difference between cumulative and non-cumulative corporate FDs?
In a cumulative FD, interest is accumulated and paid at maturity, making it suitable for long-term goals.
In a non-cumulative FD, interest is paid out monthly, quarterly, half-yearly, or annually, making it ideal for those who need regular income.
How is the effective yield calculated in a corporate FD?
Effective yield is the annualized return that includes the compounding effect of interest. It helps investors understand the true year-on-year return, especially in cumulative FD options where interest is reinvested.
Can I withdraw my money before maturity from a corporate FD?
Yes, most corporate FDs allow premature withdrawal, but penalties may apply depending on the company’s policies and the duration for which the deposit was held. Reading the terms and conditions before investing is essential.
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