Lock into these FD options

With interest rates bottoming out, go for deposits with up to two-year tenure

The consumer price inflation index has been on a decline over the past year. From around 6 per cent in July 2016, the index touched a low point of 1.54 per cent in June 2017. Taking cognizance of this among other factors, the RBI cut policy rate by 25 basis points at the monetary policy meeting last week.

While there is uncertainty over the RBI’s further rate cut, interest rates in the economy are likely to bottom out.

While interest rates on bank deposit rates today are nothing to write home about, some corporate/NBFC deposits currently offer better rates than bank FDs. However, given that rates could go up in the medium term, it will be better to lock-in up to a maximum of two years. This way, you can get the benefit of reinvesting at higher rates at the time of maturity.

Safe choices

Among the deposits with highest safety that can also provide reasonably good returns over a one- to two-year period are those from Dewan Housing Finance (DHFL) and Bajaj Finance.

Dewan Housing Finance (DHFL) Deposit Plus scheme offers interest rate of 7.75 per cent and 7.8 per cent on its one- and two-year deposit schemes respectively. This requires a minimum deposit amount of ₹2,000. The company also offers a 14-month deposit that gives 7.8 per cent, but the minimum amount is higher at ₹10,000. DHFL’s deposit scheme has been assigned an AAA rating by CARE and FAAA rating by BWR, implying highest level of safety.

Non-banking finance major Bajaj Finance’s deposit scheme offers a lower 7.6 per cent for 12-23 month deposits. But for 24-35 months, the rate is higher at 7.8 per cent. However, the minimum deposit amount for Bajaj Finance is ₹25,000 when compared to that of DHFL. The instrument has also been accorded highest credit rating by both CRISIL (FAAA) and ICRA (MAAA), implying highest safety.

DHFL is a leading home finance company in the country. As of June 2017 quarter, the company’s total assets under management stood at ₹88,240 crore; this is 22 per cent higher than the same quarter last year. The company’s gross non-performing assets stood at 0.97 per cent of loans as of June 2017.

Bajaj Finance’s business spans consumer finance, SME, commercial and rural lending. Within consumer finance, the company offers two- and three-wheeler finance, consumer durables, digital product, lifestyle product finance, personal loans and salaried home loans. The company’s asset under management stood at ₹68,883 crore as of June 2017, 39 per cent higher than the same quarter last year. The net NPAs — gross NPAs less provision — stood at 0.53 per cent of total loans in the June 2017 quarter, after moving NPA recognition policy from 120 to 90 days overdue, as required by RBI guidelines.

Options for seniors

Bajaj Finance offers a better deal for senior citizens. It gives 8.05 per cent for a 24-35 month deposit. DHFL too offers 25 basis points higher interest.

Note that all the above rates are for the cumulative option. All these schemes are currently open and don’t have a definitive closing date.

However, it pays to lock into these rates sooner than later.

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