Corporate Fixed Deposits for NRIs: The Extra 1-2% Yield, the Credit-Rating Risk Nobody Prices In, and Whether It Is Actually Worth It After Tax

A reader in Dubai had Rs 35 lakh sitting in an NRO account from a flat he sold in Pune, earning 6.75% on a one-year bank deposit. His relationship manager mentioned that Bajaj Finance and Shriram Finance were paying "almost 8%" and asked why he was leaving money on the table. He was about to move the whole lot into the highest-advertised company FD he could find, which happened to be the lowest-rated one. The extra yield was real. So was the reason it existed, and he had not priced it in at all.

The 30-second answer: NRIs can invest in corporate (company) fixed deposits, but almost always on a non-repatriable NRO basis, funded from rupee income already in India, not fresh remittances. The large NBFCs that accept NRI money are Bajaj Finance (CRISIL AAA / ICRA AAA), Mahindra Finance (IND AAA), Shriram Finance (ICRA AA+) and PNB Housing. In June 2026 they pay roughly 1% to 2% over bank NRO FDs: AAA names up to about 7.40% general and 7.75% senior, against bank NRO FDs near 7.0% to 7.25%. Interest is fully taxable with 30% TDS plus cess (31.2%), no threshold, no DICGC insurance. The honest filter: stick to AAA, keep any single issuer under about 10% of your debt corpus, and treat the extra yield on AA names as paid risk, not a gift.

This guide assumes you already know how an NRO account works, why NRO interest is taxable, and what the USD 1 million repatriation cap is; if not, start with tax on NRO interest. What follows is the part that decides real money: which companies will actually take an NRI's deposit and on what terms, what the 1% to 2% pickup is buying you in default risk, how to read an ICRA or CRISIL rating without fooling yourself, and the after-tax arithmetic that tells you whether a corporate FD beats a plain bank FD once 31.2% comes off the top.

Most NRIs can only access corporate FDs through the NRO door, and that single fact reshapes the decision

The first thing to internalise is structural, not numerical. When a resident reads about a company FD paying 8%, they can fund it from anywhere and, at maturity, the money is simply theirs. When you fund the same deposit as an NRI, you almost always do it from an NRO account, which means three constraints travel with it: the source has to be rupee income already in India, the interest is fully taxable, and the principal is non-repatriable beyond the USD 1 million per financial year limit that already governs your NRO balances.

The big NBFCs are explicit about this. Bajaj Finance accepts deposits from NRIs, OCIs and PIOs but routes them through an NRO account, with the application made offline at a branch alongside KYC and a signed form. Shriram Finance allows NRIs to open FDs but requires the offline process and caps the NRI tenure at 3 years on its Unnati scheme, against 5 years for residents. There is no meaningful market in NRE-funded or repatriable corporate FDs from the large issuers, the way there is for bank NRE and FCNR deposits. If repatriability is what you care about, a corporate FD is the wrong instrument, full stop, and you should be comparing NRE FD versus FCNR FD instead.

This matters because it changes what the right comparison even is. The honest benchmark for an NRI corporate FD is not an NRE FD (tax-free, fully repatriable) and not an FCNR FD (foreign currency, no rupee risk). It is a bank NRO FD, taxable rupee money you cannot freely repatriate either. Against that benchmark the corporate FD competes on yield and loses on safety, and the whole question becomes whether the yield gap pays for the safety gap. Holding it up against an NRE FD, as a lot of NRIs instinctively do, is comparing two different things and will always make the NRO corporate FD look worse than it is.

The yield gap is real but smaller than the headline, and it is concentrated at the bottom of the rating scale

Put the June 2026 numbers side by side. The best bank NRO FD rates from the large banks sit around 7.0% to 7.25% for one-to-three-year tenures (SBI roughly 6.50% to 7.00%, HDFC and ICICI up to about 7.10% to 7.25%). The strongest AAA-rated NBFC, Bajaj Finance, advertises up to about 7.40% for general depositors and 7.75% for senior citizens including the senior top-up. Drop one notch in credit quality and the rate jumps: Shriram Finance, rated ICRA AA+, runs roughly 7.00% to 7.60% general and up to 8.10% for seniors, and the broader NBFC market has names quoting up to 8.95% and even 9.1% at the lower-rated end.

Read that pattern carefully, because it is the whole story. The gap between a bank FD and a AAA corporate FD is modest, often 0.25% to 0.50%. The gap that gets people excited, the full 1.5% to 2%, only appears when you step down the rating ladder to AA+ and below. In other words, the market is not paying you 2% for being clever; it is paying you 2% for taking on more default risk than a bank deposit carries. The yield curve across ratings is doing exactly what it is supposed to do.

So the real choice is not "bank FD versus corporate FD." It is three distinct choices: a bank FD near 7.1%, a AAA corporate FD near 7.4% for a small, well-understood pickup, or a AA corporate FD near 8% where you are explicitly being paid to underwrite a weaker balance sheet. Senior citizens, including senior NRIs who still qualify, get an extra 0.25% to 0.50% at the NBFCs and women depositors often get a token 0.05% more at Shriram, which can nudge a AAA name past 7.75% and makes the AAA option meaningfully more attractive for that cohort.

A credit rating is a probability, not a guarantee, and AAA and AA are not "basically the same"

The single most expensive misconception about corporate FDs is treating a rating as a safety stamp. It is not. ICRA, CRISIL and CARE ratings are opinions on the probability of timely repayment, and the scale is steep. AAA signals the highest credit quality and the lowest default risk. AA+, AA and AA- are still "high safety," but the historical default rates climb at each step down, and the move from AAA to AA is a larger jump in risk than the small numbers suggest. The extra 0.5% to 1% you earn on an AA name is the market's price for that gap; it is compensation, not a bonus.

And ratings lag reality. The two cautionary names every Indian investor should keep in mind are IL&FS and DHFL, both of which carried high ratings until they were almost on top of default in 2018 and 2019, after which depositors and bondholders spent years in resolution recovering a fraction. The lesson is not that ratings are useless; a AAA portfolio would still have been far safer than an unrated one. The lesson is that a rating is a snapshot of an opinion that can be downgraded faster than your three-year FD matures, and a corporate FD, unlike a bank FD, gives you no DICGC insurance to fall back on. Bank deposits are insured by the Deposit Insurance and Credit Guarantee Corporation up to Rs 5 lakh per depositor per bank. A company FD has zero statutory backstop; if the issuer cannot pay, you are an unsecured creditor in a queue.

That single difference, DICGC cover versus none, is why the right way to use corporate FDs is as a satellite, not a core. Concentrate your safe rupee money in bank FDs and treat AAA corporate FDs as a yield enhancer on a slice of the portfolio, with a hard cap on any one issuer. A reasonable discipline: no single corporate FD issuer above roughly 10% of your fixed-income corpus, AAA only for anything you would be unhappy to lose, and AA-and-below only in small sizes where you have genuinely understood the company and accept that you are being paid to take real risk. The portfolio allocation guide puts numbers on how large that satellite slice should be for different ages and goals.

The tax treatment is identical to a bank NRO FD, and that is where the headline yield quietly erodes

Here is the part that turns an exciting 8% into a less exciting number. Interest on a corporate FD held by an NRI is not taxed in any special, gentler way. It is ordinary NRO interest income, fully taxable in India at your slab rate, and the issuer must deduct TDS at 30% plus 4% health and education cess, a flat 31.2% for most NRIs, with surcharge on top if your total Indian income crosses Rs 50 lakh. Crucially, this deduction applies from the first rupee of interest. There is no Rs 40,000 or Rs 50,000 TDS threshold for non-residents, the way there is for residents, and there is no Form 15G or 15H to suppress it. Where a resident might receive interest gross and settle up at filing, you watch nearly a third of every payout leave at source.

You have two levers to bring that down. The first is your DTAA. If you live in a country with a tax treaty with India, you can have TDS deducted at the lower treaty rate instead of 30% by giving the issuer a valid Tax Residency Certificate and Form 10F before the interest is paid. The treaty rate on interest is commonly 10% to 15% depending on the country, a large saving over 31.2%, though it is then taxable in your country of residence (the UAE, with no personal income tax, is the clean exception). Many NBFCs are less practised at processing DTAA paperwork than banks are, so confirm the issuer will actually apply it before you assume it. The second lever is the return: even at 31.2% TDS, your real liability is your slab rate, so if your total Indian income is modest you file an Indian return and claim the excess back as a refund. The mechanics are the same as for any NRO interest and are covered in tax on NRO interest.

The practical effect: a corporate FD and a bank FD are taxed identically, so tax does not favour one over the other, but it does shrink the absolute rupee gap between them, because 31.2% comes off the larger number too. A 1% pre-tax edge is only about a 0.69% post-tax edge. That is the number the decision actually turns on, and it is the number almost no marketing page shows you.

Put real money on it: a bank FD versus a AAA corporate FD on Rs 35 lakh

Take the Dubai reader's actual situation. He has Rs 35,00,000 of NRO money to lock for one year, and he is choosing between a bank NRO FD at 7.10% and a Bajaj Finance AAA FD at 7.40%, a 0.30% headline gap. Assume he has not filed DTAA paperwork, so TDS runs at the full 31.2%.

The bank FD earns Rs 35,00,000 at 7.10% = Rs 2,48,500 of interest. After 31.2% TDS that is Rs 1,70,968 net. The Bajaj AAA FD earns Rs 35,00,000 at 7.40% = Rs 2,59,000, and after the same 31.2% that is Rs 1,78,192 net. The extra yield is real but it amounts to Rs 7,224 for the year, about 0.21% of his capital after tax, in exchange for giving up DICGC insurance on the entire Rs 35 lakh. For a balance-sheet name as strong as a CRISIL AAA / ICRA AAA, many NRIs will take that trade. The point is that the trade is small, not the "almost 2%" his relationship manager implied.

Now run the counterfactual he was actually tempted by: moving the whole Rs 35 lakh into the AA-rated 8.10% senior scheme instead. That earns Rs 35,00,000 at 8.10% = Rs 2,83,500, or Rs 1,95,048 net of 31.2% TDS. Against the bank FD that is Rs 24,080 more for the year, about 0.69% after tax, a genuinely larger pickup. But he would have moved his entire safe corpus into a single AA-rated issuer with no insurance, breaking every concentration rule worth keeping. The right version of that trade is to put perhaps Rs 3,50,000, one-tenth, into the AA name and the rest into bank and AAA deposits, capturing most of the yield idea while keeping the downside survivable if that one issuer is downgraded.

And on a senior citizen's larger sum where the gap compounds

Consider Anil, a 64-year-old NRI with Rs 60,00,000 of NRO money he wants in a three-year FD, and who qualifies for senior-citizen rates. His choice is a bank NRO senior FD at 7.25% or a Bajaj Finance AAA senior FD at 7.75%, a 0.50% gap that is wider at the senior tier than the general tier. He files Form 10F and a TRC, so on the corporate FD his TDS runs at a 12.5% DTAA rate rather than 31.2%, but assume the bank applies the same treaty rate too, so tax is neutral between them.

The bank FD earns roughly Rs 60,00,000 at 7.25% = Rs 4,35,000 of interest a year before tax; the AAA corporate FD earns Rs 60,00,000 at 7.75% = Rs 4,65,000. The pre-tax difference is Rs 30,000 a year, about Rs 90,000 over three years before tax, on a top-rated name. At the 12.5% treaty rate the after-tax edge is around Rs 26,250 a year, or close to Rs 78,750 over the three years. That is a meaningful sum for a 0.50% rating step that stays inside AAA, which is exactly why the senior tier is where AAA corporate FDs make the most sense: the spread over banks is widest precisely where the credit quality is still highest. Had Anil instead chased a sub-AA name for another 0.75%, he would be adding maybe Rs 45,000 a year of pre-tax yield while taking on the kind of issuer that, in a bad cycle, can cost the whole Rs 60 lakh. The arithmetic of "a bit more yield for a lot more risk" rarely favours a retiree.

How the options actually stack up

Option	June 2026 rate (general / senior)	Credit quality	DICGC insured	Repatriable	After 31.2% TDS, the real edge
Bank NRO FD (SBI/HDFC/ICICI)	~7.0% to 7.25%	Bank, RBI-regulated	Yes, to Rs 5 lakh	NRO limits apply	Baseline
Bajaj Finance FD (AAA)	up to ~7.40% / 7.75%	CRISIL AAA, ICRA AAA	No	NRO limits apply	~0.2% to 0.35% net pickup
Mahindra Finance FD (AAA)	up to ~7.5% / ~8.0%	IND AAA	No	NRO limits apply	~0.25% to 0.5% net pickup
Shriram Finance FD (AA+)	up to ~7.60% / 8.10%	ICRA AA+, IND AA+	No	NRO limits apply	~0.6% to 0.7% net pickup, more risk
Lower-rated NBFC FD (AA / A)	up to ~8.95% to 9.1%	AA and below	No	NRO limits apply	Largest pickup, largest default risk

The table makes the spine of the decision visible: as you move down the rows the rate rises and the only thing falling is safety. The repatriability column is identical for every corporate option, because they all sit in the NRO bucket, which is precisely why a corporate FD never competes with an NRE or FCNR deposit on that dimension.

Edge cases

Funding and the residency moment. A corporate FD must be funded from your NRO account as an NRI. If you opened a company FD as a resident before moving abroad, you do not have to break it, but you must inform the issuer of your changed residency status, after which the deposit and its interest are treated on a non-repatriable NRO footing and TDS shifts to the 30%-plus-cess regime on renewal. Letting an old resident FD roll over silently after you become an NRI is a common compliance gap.

Cumulative versus payout, and the TDS timing trap. On a cumulative (reinvestment) corporate FD the interest compounds and is paid at maturity, but TDS is still deducted annually on the accrued interest, not at the end. So a three-year cumulative FD has tax taken out each year on income you have not yet received in cash, which dents the compounding the brochure shows. If cash flow and a clean annual tax position matter to you, a periodic-payout option can be easier to manage than the headline cumulative yield suggests.

DTAA paperwork at an NBFC is not guaranteed. Banks process TRC and Form 10F routinely; some NBFCs are slower or apply the lower rate only from the date the documents are accepted, not retrospectively for the year. Submit your TRC and Form 10F before the first interest date and get written confirmation that the treaty rate will apply, or budget for a refund claim instead.

The "deemed deposit" and acceptance limits. Company FDs are governed by the Companies (Acceptance of Deposits) Rules and RBI's NBFC deposit norms, which cap how much an NBFC can raise and from whom. Acceptance of NRI deposits is at the issuer's discretion and the rules change; a company that took NRI money last year may not this year. Always confirm current NRI acceptance and the specific scheme terms at the branch before you commit, rather than relying on an aggregator page.

The closing read

The honest read is that corporate FDs are a legitimate but minor tool for an NRI, not a bank-FD replacement, and the marketing oversells the gap. For most NRIs the right move is to keep the core of your safe rupee money in bank NRO FDs for the DICGC cover, add AAA-rated corporate FDs (Bajaj Finance, Mahindra Finance) as a satellite for a modest 0.25% to 0.50% pickup, and cap any single issuer at roughly 10% of your fixed-income corpus. The AAA pickup is real, small, and reasonable; after 31.2% TDS it is often only about 0.2% to 0.35% of capital, so do not overweight it. The juicy 1.5% to 2% you see advertised lives almost entirely at AA and below, and that yield is the market paying you to underwrite default risk that IL&FS and DHFL holders learned is not theoretical. Senior NRIs benefit most, because the spread over banks is widest at the senior tier while the credit quality stays highest, and they should lean AAA rather than chase rate. Always file your TRC and Form 10F to cut TDS to the treaty rate, and confirm NRI acceptance and DTAA processing at the branch first. If you are tempted to move a large single sum into the highest-advertised, lowest-rated name, that is exactly the moment to stop, because the after-tax extra is small and the tail risk is the whole deposit. For anything beyond a satellite allocation, talk to an adviser who can look at your full balance sheet, not a brochure.

Related guides

• Tax on NRO interest: how it is calculated and taxed
• NRI corporate bonds and NCDs
• NRE FD versus FCNR FD: which to choose
• Best banks for NRI fixed deposit rates in 2026
• NRI portfolio and asset allocation
• All Investments guides
• All Banking guides
• All Taxation guides

This guide is educational and general in nature. It is not individual investment or tax advice. Corporate fixed deposits are unsecured, carry issuer default risk, are not covered by DICGC insurance, and their rates, ratings and NRI acceptance terms change frequently, so verify current terms with the issuer and confirm your tax position with a qualified chartered accountant before you invest.