Not Happy With Bank Fixed Deposits? Check Out Alternatives


Not Happy With Bank Fixed Deposits? Check Out Alternatives

Since 2017, banks, with their regular rate cuts as directed by the Reserve Bank of India, have given small and conservative investors a tough time. Such investors, in keeping with their aversion to risk, want their principal and interest amounts to stay covered. This requirement of theirs, is catered to, when they invest in an FD.

However, the interest rate on a bank FD has gone for a complete toss. When RBI announced significant cuts in rates in August 2017, dependents on fixed deposit interest income went for a toss. This blow fell harder on retirees, who, for the most part are solely dependent on amounts accruing from fixed deposits, in the form of interest.

Therefore, such investors face a big question:

How to keep their incomes intact, while averting risk?

This question stands relevant in cases where investors look for steady incomes bearing rates of return that stand unaffected by market volatilities. While FD interest rates do have this positive attached to them, deductions made by RBI have reduced the investor friendliness attached to them.

So, what other resort does an investor have for parking his investible surplus?

Another viable alternative that investors have are fixed deposits provided by companies. NBFCs like Bajaj Finserv, for instance, provide investors with the alternative of investing in fixed deposits with better convenience and competitive FD interest rates.

These NBFCs also have their interest rates monitored by the RBI. Yet, they have the liberty to fix their FD interest rates at safely higher margins than bank fixed deposits. Also, these companies are duly authorized by the Reserve Bank of India to make such investments.

Hence, company fixed deposits come with a few benefits attached to them.

  1. Higher FD interest rates.
  2. Better liquidity than bank fixed deposits.
Now, an investor might pose a question relating to the attribute of liquidity associated with a company fixed deposit.

As opposed to bank fixed deposits, company fixed deposits have much simpler norms for premature withdrawal. Also, the penalty charged on FD interest rates is much lower than that charged by banks.
Undoubtedly, when an investor is in immediate need of fund during a financial exigency, he/she can easily access his/her company fixed deposit for addressing the same.

How does one trust a company’s credibility while investing in a company fixed deposit?

Its respective credit rating determines the safety of investment in a company. Credit rating institutes like CRISIL, ICRA etc. rate companies on their net owned funds. Bajaj Finserv, for instance, has ratings of MAAA and FAAA from ICRA and CRISIL respectively. Both these ratings pertain to a high degree of safety.

Can investors increase their overall returns by solely investing in company fixed deposits?

In view of higher returns from investments, one might as well be tempted to invest in instruments other than company fixed deposits. Mutual funds might be yet another avenue of investment. But one must not forget that returns from mutual funds are dependent on the market. Their market dependence, in turn, makes them highly prone to risk.

Thus, to hedge this risk, company fixed deposits are better qualified. Since they provide high FD interest rates with zero market dependence.

But, how can they provide diversification benefit?

Company fixed deposits are of two kinds:

       Cumulative.
       Non-cumulative.

One seeking diversification can easily park his/her funds by equitably dividing them in these two alternatives. While, non-cumulative schemes provide interest incomes at regular intervals, cumulative schemes, add interest amounts to principal amounts to reinvest the total amount. Thus, cumulative fixed deposits give the benefit of compounding on regular FD interest rates provided by the company.

One might ask, how can one decide the amount that one can invest for a particular tenure?

Company fixed deposits, have flexible tenures. An investor can easily invest any amount that he/she desires in any scheme, for any period of 12-60 months. For easy decision making, one can use online FD calculators, for comparing returns for different tenures for varied amounts.

Also, one can use FD calculators to arrive at the optimum mix for dividing their investments between cumulative, and non-cumulative company fixed deposits.

NBFCs like Bajaj Finserv, as mentioned earlier, provide such investment vehicles with a plethora of benefits attached to them.

  1. Online application, renewal and withdrawal facilities.
  2. 200+ branches across India.
  3. Assurance of returns.
Thus investments can be made in the most user-friendly manner with such an institution.


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