Fixed deposits of NBFCs good alternative to banks

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Interest ranges from 9.5-11%, which is more than what banks offer

FIXED deposits (FDs) being offered by several non-banking financial companies (NBFCs) at attractive interest rates are an opportunity for those looking to cash in on the high interest rate regime.

Companies that are offering FDs include Dewan Housing Finance, Mahindra Finance, Shriram Transport, HDFC, Sundaram Finance and First Leasing Company of India.
Matter of interest: FD rates offered by NBFCs range from 9.5 to 11 per cent, which are more than FD rates offered by banks. FD rates offered by banks for more than one-year tenure are in the range from 8.25 per cent to 9.25 per cent.

Attracted by higher rates, retail investors are subscribing to these FDs.

Corporate FDs are popular with subscribers, although, people are not going whole hog because bank FDs have also become attractive. Still, there is a difference of 1 to 1.5 per cent.

He said FDs were being lapped up by investors as the interest cycle has peaked. It is a good idea for those who want to lock in now, whether it's banks or companies' FDs.

Players: State Bank of India's FD rate for one-year to 10-year periods is at present 9.25 per cent, while private sector ICICI Bank's FD rates vary between 8.25 and 9.25 per cent for deposits lower than 15 lakh.

Retail interest in FDs: For Sundaram Finance, which has one of the largest retail deposit bases among NBFCs in India with 2,36,000 depositors, the renewal rate for deposits is more than 78 per cent, according to the company.

Sundaram's total deposits are over Rs 1,094.91 crore.

HDFC has a customer base of over 10,00,000 depositors and over Rs 25,000 crore in deposits.

Added advantages for privileged customers: Dewan Housing Finance (DHFL) presently offers one of the highest rates for FDs at 10.50 per cent for one-year to seven-year periods for an amount below Rs 25 lakh.

DHFL 's Aashray Deposit Plus also offers Rs 1,00,000 free accidental death insurance for all depositors.

The rates offered are higher for amounts above Rs 25 lakh. DHFL offers 10.75 per cent to ordinary customers and 11 per cent for privileged customers.

Payment of interest: All these companies pay interest accrued to investors every quarter or month directly to the customers' bank account through the electronic clearance system (ECS) on a fixed date. Still, it is important to check the company's past record in making timely interest payments before investing.

Interest payments are made on 25th of the month every quarter by Shriram Transport.
Check ratings before investing: It's also important to check the rating of the FD before investing money.

A company FD with AA rating can be considered to be a good investment.

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