After nearly four years, companies in the manufacturing space have turned to fixed deposits (FDs) and are tapping into retail liquidity amid lower bank deposit rates and tightening credit conditions. Recently, Godrej & Boyce and Hawkins Cookers announced their FD schemes — a move that many in the industry found to be interesting.
“While financial services firms have long relied on fixed deposits to raise funds, the re-entry of manufacturing companies into this space marks an interesting shift,” said Venkatkrishnan Srinivasan, Founder & Managing Partner at Rockfort Fincap LLP, who further points out that corporates are increasingly drawn to retail deposits as an alternative to more expensive bank loans or non-convertible debentures (NCDs), especially when their credit ratings fall below the threshold for competitive institutional borrowing.
“For a company rated AA-minus, tapping the NCD market, especially for unsecured borrowing, could cost around or above 10%. By offering retail FDs at around 8% for 36 months, they can lower their cost of funds by nearly 2 to 2.5%,” he explained. This arbitrage is particularly attractive in a market where bank FDs hover below 7%, making corporate FDs appear lucrative to retail investors. Hawkins Cookers enjoys an AA minus (Stable) rating from ICRA. Meanwhile, Godrej & Boyce enjoys an AA (Stable) rating from CRISIL and is offering three-year FDs between 7.60% to 7.75% with an additional 0.25% interest rate for senior citizens. For FY26, the amount of deposit the company can raise is Rs 1,773.17 crore.
Why Companies Prefer Retail Over Banks
“The strategy behind corporate fixed deposits is clear; these FDs are designed to lure investors who are currently struggling with low bank deposits,” said a senior banker who believes that while the rates are attractive, they are not without risk. It’s a way for companies to tap into retail liquidity when institutional routes become expensive or inaccessible.
Raising money via FDs isn’t new. In fact, in the past 2-3 years, small finance banks (SFBs), financial services firms like Shriram Finance and Bajaj, and housing finance companies (HFCs) have been mobilising money through FDs to diversify funding and strengthen liability profiles. SFBs like slice, Suryoday and Jana Small Finance Banks are offering competitive FD rates up to 8.5% per annum for 18 months to 5 years tenures. This shift is driven by the need to reduce dependence on institutional funding and bridge asset-liability mismatches.
Risks Retail Investors Should Not Ignore
Meanwhile, players have cautioned against a simplistic comparison. “Retail investors must understand the difference between a bank FD and a corporate FD. The latter is often unsecured, and in the event of a default, repayment priority is significantly lower,” said a bond market dealer referencing past cases like Morepen Laboratories, where depositors waited years for resolution after defaults led to equity conversions. He also highlights the role of brokers in this ecosystem, suggesting that generous incentives are likely being offered to push these products to retail investors. “Corporates may not be able to raise Rs 100 crore in one go, but through incremental retail deposits, they can build a funding base, albeit slowly,” he added. He emphasises that while the returns may seem compelling, especially in comparison to traditional bank deposits, investors must weigh the trade-off between yield and security.
Srinivasan acknowledges that such instruments are not new to the market, but he emphasises the need for investor awareness. “There are better-regulated options available, like small savings schemes or RBI floating rate bonds, which offer comparable returns with stronger regulatory safeguards,” he says. Ultimately, he sees the trend as a reflection of current market dynamics, where rising yields, constrained bank lending, and retail appetite for higher returns converge to create fertile ground for corporate FDs. But Srinivasan urges caution, “Attractive rates are welcome, but investors should always assess the credit quality, issuer’s standalone credit rating, past few years’ profitability, and other terms carefully. Due diligence ensures the choice matches one’s risk appetite.”