If you are looking for higher interest rates on fixed deposits (FDs), corporate fixed deposits from non-banking financial companies (NBFCs) and housing finance companies (HFCs) can be seen as an attractive option. These deposits offer higher returns when compared to major private and public sector banks. However, it is crucial to assess the risks involved before investing.
A key method to evaluate the risk is by examining the credit ratings assigned by rating agencies such as CRISIL, ICRA, and CARE. These agencies evaluate the financial health of the NBFC or HFC issuing the corporate FDs, and their ratings reflect the likelihood of default on interest and principal repayments.
Also Read: With guaranteed returns, do FDs offer a good investment bet to investors? Experts answer
Higher-rated corporate FDs are generally safer, with lower chances of defaults. Therefore, it’s important for depositors to carefully study these ratings to make informed decisions.
Here are some corporate fixed deposits that currently offer the best interest rates:
| Company name | Credit rating | Interest Rates (p.a.) | Additional interest rate for senior citizen | ||||
|---|---|---|---|---|---|---|---|
| Highest rate slab | Applicable tenure |
1-year tenure |
3-year tenure |
5-year tenure |
|||
| Shriram Finance* | ICRA – AA+/Stable IND AA+/Stable by India Ratings and Research |
8.47 | 50 months and 5 years | 7.59% | 8.38% | 8.47% | 0.50% |
| Mahindra Finance | CRISIL – AAA/Stable India Ratings – IND AAA/Stable |
8.1 | 3 years and 5 years | 7.50% | 8.10% | 8.10% | 0.25% |
| Manipal Housing Finance Syndicate Ltd. | ACUITE – ACUITE A | 8.25 | 1 year, 2 years and 3 years | 8.25% | 8.25% | 7.75% | 0.25% |
| PNB Housing Finance Ltd. | CRISIL – AA/Positive CARE – AA+/Stable |
7.85 | 36-47 months | 7.45% | 7.85% | 7.65% | 0.20%-0.30% |
| Sundaram Home Finance | CRISIL – AAA/Stable ICRA – AAA/Stable |
7.9 | 4 years and 5 years | 7.45% | 7.75% | 7.90% | 0.35%-0.50% |
| Muthoot Capital Services Limited | CRISIL – A+/Stable | 8.38 | 5 years | 7.21% | 8.07% | 8.38% | 0.50% |
| ICICI Home Finance | CRISIL – AAA/Stable ICRA – AAA/Stable CARE – AAA/Stable |
7.65 | 3 to less than 5 years | 7.25% | 7.65% | 7.60% | 0.25% |
| Can Fin Homes Ltd. | ICRA – AAA/Stable | 7.5 | 3 years | 6.50% | 7.50% | 6.75% | 0.25%-0.50% |
| Bajaj Finance Limited | CRISIL – AAA/Stable ICRA – AAA/Stable |
8.6 | 42 months | 7.40% | 8.10% | 8.10% | 0.25% |
| LIC Housing Finance Ltd. | CRISIL – AAA/Stable | 7.75 | 3 years and 5 years | 7.25% | 7.75% | 7.75% | 0.25% |
| *At Monthly Rests. Additional interest of 0.25% p.a on all renewals, where the deposit is matured. Additional interest of 0.10% p.a. for women depositors. | |||||||
Source: Paisabazaar, data as on 22nd May 2024
Factors to consider before investing in corporate fixed deposits
When investing in corporate fixed deposits, it is essential to consider several key factors to make informed decisions. First and foremost, check the credit rating of the issuer, as choosing corporate FDs from companies with high credit ratings minimises credit risk.
Next, think about the tenure of the fixed deposit and ensure it aligns with your financial goals to match your investment period with your future financial needs. Comparing interest rates and payout frequencies among different companies is crucial to select the best return that suits your requirements.
Additionally, you may check if there is any lock-in period before investing, particularly if you might need access to your funds before maturity. Be mindful of the tax implications, especially if you are in a higher tax bracket, since the interest earned is taxable and can affect your net returns.
Also Read: Income tax return (ITR) filing 2024: How to show accrued interest on bank fixed deposits (FDs)?
Lastly, consider diversifying your portfolio by investing in a mix of corporate FDs and other low-risk instruments to manage risk effectively. By keeping these factors in mind, you can achieve a balanced approach to your investments while maximising potential returns.
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Published: 24 May 2024, 10:14 AM IST