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BONDS AND DEPOSITES

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BONDS AND DEPOSITES

Bond vs Fixed Deposit

Category	Bonds	Fixed Deposits
Definition	A bond can be defined as a type of financial instrument that serves as a loan from an investor to a borrower. This loan is typically used to fund various projects or operations, and the borrower agrees to pay the investor back with interest at a predetermined rate and date.	A fixed deposit is a type of savings account that pays a fixed interest rate until maturity.
Issuers	Government, corporations, PSUs and Banks	Banks, Post-offices, NBFCs
Return	Bonds generally offer a higher return than fixed deposits, especially for those with longer maturity periods and possibility of capital gains.	Returns are fixed but offer lower return than bonds.
Liquidity	Bonds can be bought and sold on the market, making them more liquid than fixed deposits.	Fixed deposits are less liquid than bonds, as they are typically held until maturity. However, some banks may offer the option to withdraw the funds early with a penalty fee.
Maturity	Bonds can have various maturity periods, ranging from a few months to several years.	Fixed deposits typically have a fixed maturity period, ranging from a few months to several years.
Credit rating	Bonds are assigned a credit rating by rating agencies, indicating the creditworthiness of the issuer. The rating can affect the interest rate offered to bondholders.	Fixed deposits are not assigned a credit rating, as they are backed by the bank’s own funds. Alternatively, corporate and NBFCs fixed deposits do carry a credit rating
Transaction Mode	Bonds are traded on the bond market, which can be accessed through online trading platform like IndiaBonds	Fixed deposits are offered by banks, corporates and can be opened online or in person.

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