Company FDs offer higher interest than banks. Mind the added risks, though
From HDFC, LIC housing finance to Shriram Transport Finance Co, company FDs are offering interest rates in excess of 7 percent for 3-year fixed deposits. But watch out for their credit ratings before you invest.
In September, the Reserve Bank of India announced a massive 50-basis point (bps) hike in repo rate (100 basis points = 1 percentage point). This was the fourth consecutive repo rate hike in this financial year. With the latest round of rate increase, the cumulative hike since May 2022 now stands at 190 bps. In this rising interest rates scenario, leading non-banking financial companies (NBFCs) and housing finance companies (HFCs) have raised interest rates on their fixed deposits. The interest rates of corporate fixed deposits are higher compared to what public sector banks and major private sector banks offer. However, unlike bank FDs, DICGC does not cover corporate FDs with deposit insurance of Rs 5 lakh.
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The depositors should carefully study the ratings assigned by agencies like CRISIL, ICRA and CARE while selecting the corporate FDs. They assigned these ratings based on the agencies’ assessment of the financial health of the NBFC or the HFC issuing corporate FDs. Higher-rated corporate FDs carry lower chances of defaults in interest and principal repayments. Here are some corporate FDs that offer the best interest rates. The list is compiled by Paisabazaar.
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Shriram Transport Finance Co Ltd offers an interest rate of 7.76 percent p.a. (at monthly rests) on cumulative FDs opened for a three-year tenure. Thus, a cumulative FD of Rs 10,000 opened for a three-year tenure will amount to Rs 12,513 on the maturity date. NBFC also offers an additional interest of 0.25 percent p.a. on renewals of matured deposits. India Ratings and Research (Ind-Ra) has assigned a credit rating of AA+/Stable to this NBFC. As per the rating agency, AA+ indicates a high degree of safety regarding timely servicing of financial obligations and carries very low credit risk. Further, credit rating agency ICRA has assigned the credit rating of AA+/Stable to this NBFC. As per the rating agency, AA+ rating indicates high credit quality with low credit risk for the depositor.
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Shriram City Union Finance Co Ltd offers an interest rate of 7.76 percent p.a. (at monthly rests) on cumulative FDs opened for a three-year tenure. Thus, a cumulative FD of Rs 10,000 opened for a three-year tenure will amount to Rs 12,513 on the maturity date. Additional interest of 0.25 percent p.a. on renewals of matured deposit is offered to depositors. Credit rating agency ICRA has assigned the credit rating of MAA+/Stable to this NBFC. As per the rating agency, MAA rating indicates high credit quality with low credit risk for the depositor.
PNB Housing Finance Ltd. offers an interest rate of 7.55 percent p.a. (compounded annually) on cumulative FDs opened for a 3-year tenure. Thus, a cumulative FD of Rs 10,000 opened for a 3-year tenure will amount to Rs 12,440 on the maturity date. Credit rating agency CRISIL has assigned the credit rating of FAA+/Negative to this HFC. As per this rating agency, FAA indicates strong chances of timely interest and principal repayment by the HFC. Credit rating agency CARE has assigned the credit rating of AA/Stable to this HFC. As per CARE, an AA rating indicates a high degree of safety regarding timely servicing of financial obligations and carries very low credit risk for the depositors.
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Bajaj Finance Ltd. offers an interest rate of 7.40 percent p.a. on cumulative FDs opened for a three-year tenure. The minimum deposit amount set by the NBFC is Rs 15,000. Thus, a cumulative FD of Rs 15,000 opened for a three-year tenure will amount to Rs 18,582 on the maturity date. CRISIL has assigned a credit rating of AAA/Stable to this NBFC. As per the rating agency, AAA indicates very strong chances of timely interest and principal repayment by the NBFC. Further, ICRA has assigned a credit rating of AAA/Stable. As per ICRA, AAA indicates highest-credit-quality and carries the lowest credit risk for the depositors.
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LIC Housing Finance Ltd offers an interest rate of 6.95 percent p.a. (compounded annually) on cumulative FDs opened for a 3-year tenure. Thus, a cumulative FD of Rs 10,000 opened for a 3-year tenure will amount to Rs 12,233 on the maturity date. CRISIL has assigned a credit rating of AAA/Stable to this HFC. As per the rating agency, AAA indicates very strong chances of timely interest and principal repayment by the HFC.
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HDFC Ltd. offers an interest rate of 6.85 percent p.a. (compounded annually) on cumulative FDs opened for a 3-year tenure. Thus, a cumulative FD of Rs 10,000 opened for a 3-year tenure will amount to Rs 12,199 on the maturity date. This HFC offers an additional interest rate of 0.05 percent p.a. on individual deposits renewed/placed through their online deposit system and auto-renewed deposits. CRISIL has assigned a credit rating of AAA to this HFC. As per the rating agency, AAA indicates very strong chances of timely interest and principal repayment by the HFC. Further, ICRA has assigned a credit rating of AAA. As per the agency, AAA is the highest credit-quality rating and carries the lowest credit risk for the depositors.
Muthoot Capital Services Ltd. offers an interest rate of 6.75 percent p.a. (compounded annually) on cumulative FDs opened for a 3-year tenure. Thus, a cumulative FD of Rs 10,000 opened for a 3-year tenure will amount to Rs 12,165 on the maturity date. Credit rating agency CRISIL has assigned the credit rating of FA+/Stable to Muthoot Capital Services Ltd. The rating agency's FA rating indicates adequate safety regarding timely payment of interest and principal.
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ICICI Home Finance Ltd. offers an interest rate of 6.70 percent p.a. (compounded annually) on cumulative FDs opened for a 3-year tenure. Thus, a cumulative FD of Rs 10,000 opened for a 3-year tenure will amount to Rs 12,148 on the maturity date. CRISIL has assigned a credit rating of AAA/Stable to this HFC. As per the rating agency, AAA indicates very strong chances of timely interest and principal repayment by the HFC. Further, ICRA has assigned a credit rating of AAA/Stable. As per ICRA, AAA is the highest credit-quality rating and thus, indicates the lowest credit risk for the depositors. Credit rating agency CARE has assigned the credit rating of AAA/Stable to this HFC. As per the rating agency, AAA indicates the highest degree of safety regarding timely servicing of financial obligations and carries the lowest credit risk.
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Sundaram Home Finance Ltd. offers an interest rate of 6.65 percent p.a. (compounded quarterly) on cumulative FDs opened for 3-year tenure. Thus, a cumulative FD of Rs 10,000 opened for 3-year tenure will amount to Rs 12,131 on maturity date. ICRA has assigned credit rating of AAA. As per the rating agency, AAA indicates the highest credit quality rating and carries the lowest credit risk for the depositors.
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The data on FDs and credit ratings is as of October 20, 2022, as given on the respective websites of NBFCs/HFCs. The fixed deposit interest rates are for non-senior citizens (below 60 years of age) and the first deposit slab of respective NBFCs/HFCs is considered.
Hiral Thanawala is a personal finance journalist with 9 years of reporting experience. Based in Mumbai, he covers financial planning, banking and fintech segments from personal finance team for Moneycontrol.
