Smart Seniors. FD options for seniors

Over the past few weeks, a few banks, led by the country’s largest banker, State Bank of India, have increased not just the lending rates but also the interest rates on their fixed-deposit schemes. If you are a senior citizen looking to earn a little more on your retirement corpus, you can look beyond bank FDs.

Choices

There are FD schemes of non-banking financial companies which have been given the highest rating by credit rating agencies, and offer attractive rates, higher than banks, which typically offer 7-8 per cent over one-five years. Here are three schemes you can consider across one-, two-, three- and five-year time-frames.

If you are looking at a one-year horizon, the FD scheme launched by Dewan Housing Finance Ltd (DHFL) is an option.

DHFL’s FD schemes have been rated AAA by CARE, and FAAA by Brickworks Ratings — indicating the highest degree of safety with respect to timely payment of interest and principal upon maturity.

The base interest rate under this scheme is 7.7 per cent for the cumulative option. Senior citizens get an additional 0.4 per cent, taking the effective rate to 8.1 per cent. The minimum investment is ₹25,000.

For a slightly longer duration of, say, 18 months, DHFL’s Swayamsiddha scheme is also an option. The base interest rate is 7.8 per cent, and senior citizens are eligible for an additional 0.4 per cent, translating into an effective rate of 8.2 per cent.

DHFL has assets totalling over ₹78,000 crore and operates through a network of 181 branches.

In case you are looking to diversify investment within NBFC FDs, the second-highest interest-yielding scheme (7.95 per cent) is the FD scheme of Mahindra and Mahindra Financial Services (MMFS). It has also been given the highest rating by CRISIL, FAAA.

MMFS is among the country’s largest rural-focussed NBFCs. The company has a network of over 1,000 branches.

If you are looking for a two-year investment period, you can consider Bajaj Finance’s FD scheme, which offers 8.5 per cent annual interest under the cumulative option for senior citizens. The minimum deposit is ₹25,000. It also has the highest rating of FAAA by CRISIL, and MAAA by ICRA.

Next to Bajaj Finance is MMFS’s FD scheme with a base interest rate of 7.9 per cent. Senior citizens get an additional interest of 0.25 percentage point, translating into an effective 8.15 per cent.

This is applicable for physical applications. In case you opt to invest online, you can get an additional 0.10 percentage points, translating into 8.25 per cent annual interest. Bajaj Finance is the largest lender in the country for consumer durables.

For those looking at a tenure of three years or more, but less than five years, Bajaj Finance offers the highest return on FD.

For senior citizens, the rate on cumulative deposit for 36-60 months is 8.75 per cent. MMFS offers the next highest rate of 8.3 per centon senior citizen deposits.

If you are looking at a five-year horizon, Bajaj Finance offers 8.75 per cent on deposits for up to 60 months. Chennai-based Shriram Transport Finance and Shriram City Union Finance offer 8.5 per cent on their five-year FD schemes. While Shriram Transport Finance has the highest rating of FAAA from CRISIL (highest safety), its rating by ICRA is a notch lower, MAA+, which indicates high safety with a positive outlook.

Shriram Transport Finance is a leading commercial vehicle finance company, while Shriram City Union Finance is into retail finance.

Wait and watch

Do note that the RBI has hiked the repo rate in the recent monetary policy and some banks have hiked lending rates over the past few days. It may therefore pay to wait and see if one can get a better deal.

Also, for those who are looking at safety over returns, it may be worth noting that FD schemes launched by banks come with a deposit insurance of ₹1 lakh. However, for NBFC FD schemes, there is no such insurance.

The writer is co-founder, Rana Investment Advisors.

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