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High returns, but watch out for credit risks in corporate FDs

Corporate fixed deposits offer higher interest rates compared to bank fixed deposits. But, there is a risk of default in low-rated FDs. So, check the ratings assigned and company financials before investing.

July 25, 2022 / 04:28 PM IST
Leading non-banking financial companies (NBFCs) and Housing Finance Companies (HFCs) have raised interest rates on their fixed deposits as the Reserve Bank of India (RBI) has raised the repo rate by 90 basis points to 4.9 percent (100 basis points = 1 percentage point) in this financial year to control the rising inflation. The interest rates of corporate fixed deposits are higher compared to public sector banks and major private sector banks. However, unlike bank FDs, DICGC does not cover corporate FDs with deposit insurance of Rs 5 lakh.
Leading non-banking financial companies (NBFCs) and Housing Finance Companies (HFCs) have raised interest rates on their fixed deposits as the Reserve Bank of India (RBI) has raised the repo rate by 90 basis points to 4.9 percent (100 basis points = 1 percentage point) in this financial year to control the rising inflation. The interest rates of corporate fixed deposits are higher compared to public sector banks and major private sector banks. However, unlike bank FDs, DICGC does not cover corporate FDs with deposit insurance of Rs 5 lakh.
The depositors should carefully study the ratings assigned by rating agencies like CRISIL, ICRA and CARE while selecting the corporate FDs. They assigned these ratings based on agencies’ assessment of the financial health of the NBFC or 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 .
The depositors should carefully study the ratings assigned by rating agencies like CRISIL, ICRA and CARE while selecting the corporate FDs. They assigned these ratings based on agencies’ assessment of the financial health of the NBFC or 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.
STFC
Shriram Transport Finance Co Ltd offers an interest rate of 7.48 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 12,510 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 MAA+/Stable to this NBFC. As per the rating agency, MAA rating indicates high credit quality with low credit risk for the depositor.
Shriram citi
Shriram City Union Finance Co Ltd offers an interest rate of 7.48 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 12,510 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.
Bajaj Finance
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 FAAA/Stable to this NBFC. As per the rating agency, FAAA indicates very strong chances of timely interest and principal repayment by the NBFC. Further, ICRA has assigned a credit rating of MAAA/Stable. As per ICRA, MAAA indicates highest-credit-quality and carries the lowest credit risk for the depositors.
PNB
PNB Housing Finance 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. 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.
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.
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.
HDFC
HDFC 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. 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 FAAA/Stable to this HFC. As per the rating agency, FAAA indicates very strong chances of timely interest and principal repayment by the HFC. Further, ICRA has assigned a credit rating of MAAA/Stable. As per the agency, MAAA is the highest credit-quality rating and carries the lowest credit risk for the depositors.
LIC Housing Finance Ltd offers an interest rate of 6.65 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 12,131 on the maturity date. CRISIL has assigned a credit rating of FAAA/Stable to this HFC. As per the rating agency, FAAA indicates very strong chances of timely interest and principal repayment by the HFC.
LIC Housing Finance Ltd offers an interest rate of 6.65 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 12,131 on the maturity date. CRISIL has assigned a credit rating of FAAA/Stable to this HFC. As per the rating agency, FAAA indicates very strong chances of timely interest and principal repayment by the HFC.
ICICI Home Finance Ltd. offers an interest rate of 6.60 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 12,114 on the maturity date. CRISIL has assigned a credit rating of FAAA/Stable to this HFC. As per the rating agency, FAAA indicates very strong chances of timely interest and principal repayment by the HFC. Further, ICRA has assigned a credit rating of MAAA/Stable. As per ICRA, MAAA 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.
ICICI Home Finance Ltd. offers an interest rate of 6.60 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 12,114 on the maturity date. CRISIL has assigned a credit rating of FAAA/Stable to this HFC. As per the rating agency, FAAA indicates very strong chances of timely interest and principal repayment by the HFC. Further, ICRA has assigned a credit rating of MAAA/Stable. As per ICRA, MAAA 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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The data on FDs and credit ratings is as of July 12, 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.
first published: Jul 22, 2022 06:48 am
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