Keeping our financial footing strong is of paramount importance in today’s ever-evolving environment. It’s best to do research and have a firm grasp of a fd’s inner workings before blindly diving in. Here, we’ll analyse the FDs offered by NBFCs to see how they stack up against one another.
The safest way to invest historically has been fixed deposits, it comes with a wide variety of options and considerations. Learn all the ins and outs of this investment tool from this article.
One must have a well-defined plan for their financial future in order to get the desired rate of return on their assets. Therefore, it is not a very realistic concept to rely solely on bank FDs for our requirements in the present, when nationalised banks are slashing interest rates and inflation is growing. To make an informed investment decision, we need to evaluate the various fixed-income products offered by banks and NBFCs (Non-Bank Financial Companies).
What is a Fixed Deposit?
Banks and non-banking financial institutions both provide investment opportunities known as “fixed deposits.” Compared to the rates provided by a standard savings account, FDs provide higher returns on the initial investment.
For this reason, the label “fixed deposit investment” refers to the fact that the term of the deposit is set in stone. Investors might choose to put their money into FDs for a short or lengthy period of time, depending on the rest of their investment portfolio. A customer can get a wide range of fixed deposit interest rates from a variety of financial institutions.
Remember, too, that there will be penalties for cashing out a fixed deposit before it matures. In cases of extreme necessity, early withdrawal may be requested for a fee.
NBFC Fixed Deposit
According to the Companies Act (2013), a Non-Banking Financial Company (NBFC) is a company that primarily deals in lending, investments (shares, stocks, bonds, debentures, securities), leasing, hire-purchase insurance, and/or chit funds by accepting deposits in one lump sum or instalments under any scheme or arrangement. Companies engaged in agricultural, industrial, trade, and building and development operations are not included.
The following are the several sorts of NBFC:
Asset Finance Company: A company that supports productive activities such as heavy machinery and vehicles as its major asset.
Investment Company: Companies acquire funds from investors and invest them in the market.
Loan Company: Provides financial help to people and enterprises.
Infrastructure Finance Company: A lending company that invests 34 percent or more of its total assets in infrastructure loans.
Core Investment Company: A company that invests 90% of its net assets in stock, bonds, and loans.
Micro Finance Company: A company that provides financial assistance to low-income groups with fewer restrictions than other industries.
Housing Finance Company: Provides housing financing.
Mortgage Guarantee Company: A company that provides financial support to borrowers in the form of a mortgage.
Features And Benefits Of NBFC Fixed Deposits
Fixed deposits offered by NBFCs have several features and benefits. It’s a good idea to learn about these aspects before investing in this instrument. You may find them here.
Guaranteed Returns
NBFC fixed deposits provided guaranteed or secured returns that were unaffected by market swings. This indicates that the danger of losing the principal is nearly nil.
Possibility Of Receiving Regular Income
The option to receive the interest generated as a regular dividend is available with NBFC fixed deposits. You may utilise this service to obtain a regular income on a monthly, quarterly, semi-annual, or annual basis.
Possibility Of Obtaining A Loan Against FD
Most NBFC fixed deposits additionally allow you to borrow a portion of the principal amount as a loan against the FD. Such loans have incredibly low interest rates.
FD Renewal Made Simple
It is also quite simple to renew an NBFC fixed deposit. In most situations, you can do this online using internet banking and continue to benefit from regular and guaranteed returns.
Flexible Investment Durations
If you want to invest in a fixed deposit with an NBFC, you may pick from a variety of investment terms. Tenor choices typically vary from 12 to 60 months.
Higher Returns Than Bank Deposits
NBFC FD rates are normally somewhat higher than bank fixed deposit rates of return. As a result, they are great investment vehicles for cautious investors seeking higher returns.
Higher NBFC FD Rates For Senior Citizens
Another distinguishing aspect of NBFC fixed deposits is that they, like all FDs, provide greater NBFC FD interest rates to older individuals. For seniors, the rate is typically higher by about 0.25%.
List Of Top NBFCs To Invest
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TNPFC Fixed Deposit
TNPFC is a government-owned NBFC that offers exceptionally favourable interest rates on Fixed Deposits. The organisation provides two types of FD schemes: cumulative and non-cumulative deposits. The company’s fixed-rate deposits vary from 7% to 7.75% for the general public and from 7.50% to 8.25% for senior citizens. The maturity time can range from 12 to 60 months.
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Shriram Transport Finance FD
Shriram Finance Company Ltd is a subsidiary of the SHRIRAM Group, a conglomerate with a large involvement in the financial industry. STFC is in the commercial vehicle finance market, mostly focused on trucks ranging from used to new. STFC’s FD is rated “[ICRA]AA+ (Stable)” by ICRA and “‘IND AA+/Stable” by India Ratings & Research, indicating a high level of safety. It is a deposit-taking NBFC with 1,758 branches, 831 rural centres, and alliances with 500 private financiers. On deposits of less than Rs 5 crore, the NCFC provides FDs in both cumulative and non-cumulative forms. The interest rate ranges from 6.78% to 8.0%, with senior citizens paying the highest rate of 8.50%. Deposit terms range from 12 to 60 months for both types of deposits.
Bajaj Finance, the main division of Bajaj Finserv Limited, is one of the most diverse NBFCs in the Indian sector. Deposits with Bajaj Finance are secure since its FD plan has the highest domestic credit rating of CRISIL AAA & ICRA AAA. Bajaj Finance offers FDs with cumulative and non-cumulative choices with maturities ranging from 12 months to 60 months. It also provides specific FD for various tenure durations ranging from 15 to 44 months. It now offers the greatest interest rate of 7.50% and the lowest interest rate of 6.80% to general residents. On senior citizen deposits, the firm gives up to 0.25% additional interest.
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PNB Housing Finance FD
PNB Housing Finance Limited (PNB Housing) is a housing finance company that is registered with the National Housing Bank (NHB). PNB Housing is promoted by Punjab National Bank (PNB), one of India’s biggest public sector banks. With more than three decades of specialised experience in the sector of housing finance, PNB Housing has a large network of branches around the country that allows its clients to easily access financial services (loans and deposits). PNB Housing Finance FD is safe since it is rated AA/Negative by CRISIL and CARE AA/Stable by CARE. The organisation provides deposits with maturities ranging from 12 months to 120 months. For general public deposits, the FD rate ranges from 7% to 7.40%. For deposits up to Rs 5 crore, senior citizens (those over the age of 60) can earn interest rates ranging from 7.25% to 7.65%. It provides senior citizens with an additional 0.25% interest rate. The senior citizen’s enhanced FD rate is applicable for deposits up to Rs 1 Crore.
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Mahindra Finance Fixed Deposit
Mahindra & Mahindra Financial Services Limited (MMFSL), a subsidiary of the Mahindra Group, is an NBFC that primarily finances the acquisition of new and used auto and utility vehicles, tractors, automobiles, commercial vehicles, construction equipment, and SME financing. Mahindra Finance Fixed Deposits have the greatest level of security, as evidenced by India Ratings’ IND AAA / Stable rating. The organisation provides FDs in both cumulative and non-cumulative alternatives, including the Dhanvruddhi Scheme, Samruddhi Scheme, and Bulk Deposit for deposits of up to and including 5 crores. The company’s FD offers interest rates ranging from 6.75% to 7.75% for terms ranging from 30 months to 60 months. It provides an extra 0.25% interest rate on deposits made by senior citizens.
Differences Between NBFC And Bank FDs
When deciding whether to invest in NBFCs or bank FDs, it is essential to grasp the distinctions between the two types of investments. Here are the primary differences:
NBFCs are prohibited from accepting demand deposits, although banks are permitted to take them.
A deposit insurance facility is available to the depositors by DIGC (Deposit Insurance and Credit Guarantee Corporation). This option is unavailable in the case of NBFCs.
Customers of NBFCs cannot get transaction services such as the issuance of traveller’s cheques, the provision of an overdraft facility, the transfer of cash, etc. In contrast, banks provide these sorts of services.
Should You Select NBFC Or Bank Fixed Deposits?
When seeking to grow your funds with a fixed deposit, it is essential to choose the correct financial institution. Here is a full comparison of NBFC FD vs. Bank FD to assist you in making the correct decision.
- Interest Rate Being Offered
Non-banking Financial Companies (NBFCs) typically provide greater interest rates than bank fixed deposit rates. This is because of the “credit risk” associated with NBFCs. A bank’s interest rates on fixed deposits are generally lower than those of an NBFC.
- Risk Associated
With the Budget of 2020 announcing an increase in insurance coverage to Rs.5 lakh, bank fixed deposits are seen as safer. NBFCs FDs, on the other hand, do not provide this protection. However, credit rating organisations such as CRISIL and ICRA assign various NBFCs safety ratings depending on their reputations and qualifications. NBFC fixed deposits with AAA ratings from CRISIL and ICRA are the safest investments. When saving with fixed deposits, it is essential to choose NBFCs with a solid reputation and good safety ratings to prevent losing interest payments or principal.
- Tax Benefits
While NBFC FDs give a higher interest rate, bank FDs provide more tax advantages. Section 80C of the Income Tax Act (ITA) permits tax deductions of up to Rs.1.5 lakh per year on 5-year bank deposits. During the lock-in period, however, you will not receive tax benefits if you make any early withdrawals.
- Convenience
When deciding between bank FDs and NBFC FDs, you can take into account the ease of saving and the additional benefits you stand to acquire. Several NBFCs provide end-to-end online depositing, allowing you to effortlessly increase your funds. You can also take advantage of the loan against FD facility and renewal rate perks, which facilitate the growth of your savings.
How Do You Select The Best NBFC Fixed Deposits?
If you wish to invest in NBFC FD selecting the one with the highest interest rate is straightforward. However, this strategy is not optimum. Consider the following factors while picking the best corporate fixed deposit:
Background Of Company: It is advisable to study the history of the firm with whom you intend to open an FD. A trustworthy company with a long history of delighted customers and profitability is a safe investment. Internet accessibility has made it simpler for investors to examine the websites of financial organisations and assess their options prior to deciding on a certain organisation.
Repayment History: The foreign currency market has been more competitive than ever in recent years. In the past, several firms have defaulted on their payments owing to the attraction of high interest rates. Alternately, depositors did not get their withdrawals on schedule. Consider companies that produce consistent interest payments and repay fixed deposits on time.
Credit Rating: Well-known credit rating agencies such as ICRA and CRISIL utilise a 14-point scale to measure the predicted risk levels of a fixed deposit. The investment is more secure the higher the rating. Before making an investment decision, you may evaluate the stability of a corporate fixed deposit and even compare comparable products using this rating.
How To Open A NBFC FD Account In Kuvera?
Step 1: Download the Kuvera app, and complete your KYC with PAN and Aadhaar.
Step 2: From ‘Home’ go to “Invest” and select FD.
Step 3: Select ‘NBFC FDs Option’ to get a list of all corporate fixed deposits available on Kuvera. Tap on any to know its tenure, interest rate, and minimum deposit requirements. Also, check the lock-in period etc.
Step 4: Select the fixed deposit you want to buy and press the “Start FD” button.
Step 5: Enter the required details and tap on ‘Pay Now’. You are done within minutes!
FAQs:
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What Is The NBFC Fixed Deposit Interest Rate?
The NBFC FD rates vary from company to company and are subject to change periodically. The interest rates depend on the amount of the FD, the duration of the investment, and the repo rates in the economy. The deposit rates given by NBFCs to senior citizens are significantly greater than those offered to younger individuals.
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Which NBFC Offers The Highest Rates On FDs?
NBFCs offer variable interest rates on fixed deposits, which fluctuate depending on the repo rate and the company’s internal policy. Therefore, while determining which Non-Banking Financial Company offers the highest yields on fixed deposits, the top slot on the list may be held by various NBFCs at different times. You can determine which NBFC offers the greatest fixed deposit rates by conducting an online comparison on platforms like Kuvera.
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How Does A NBFC Determine The Rate Of Interest On Fixed Deposits?
NBFCs determine the interest rate on their fixed deposits depending on a number of criteria, including their profitability, internal policies, repo rates, and others. Consequently, NBFC FD rates cannot exceed the Reserve Bank of India’s maximum rate.
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