scorecardresearchCorporate FD rates rise, offering depositors up to 3% higher than banks

Corporate FD rates rise, offering depositors up to 3% higher than banks

Updated: 16 Jun 2022, 09:48 AM IST
TL;DR.
A 44-month deposit of Bajaj Finance pays 7.35%, while a HDFC Bank FD pays 5.6% for a 3-5 year tenure, giving an investor a spread of 175 basis points over bank deposits
HDFC Limited and Bajaj Finance, both top-rated companies, raised deposit rates for the third time in the last couple of months. 

HDFC Limited and Bajaj Finance, both top-rated companies, raised deposit rates for the third time in the last couple of months. 

Some finance companies have started raising interest rates on their deposits as the Reserve Bank of India signalled tighter monetary policy in the months ahead to tame inflation, reported The Economic Times.

HDFC, Bajaj Finance and PNB Housing Finance have raised their deposit rates across various tenures by 10 to 25 basis points, but analysts said investors must wait more before locking their money into long-term tenures.

"Even though companies have raised deposit rates multiple times, the quantum of raise is small to the extent of 10-25 basis points across different maturities to gauge depth of the market and see how much money they can collect," said Juzer Gabajiwala, director, Ventura Securities, wrote ET.

HDFC Limited and Bajaj Finance, both top-rated companies, raised deposit rates for the third time in the last couple of months.

HDFC has raised deposit rates by 20 basis points for 12-36 month deposits and 10 basis points in the 36-120-month tenure effective June 15, Bajaj Finance has raised deposit rates by 25 basis points for a tenure of 1-5 years, while PNB Housing Finance raised rates by 25 basis points across tenures barring the 48-59-month maturity where it has raised rates by 10 basis points.

Fixed deposits of finance companies are popular among small savers, mainly retirees, who want simple products and regular income from their savings.

Retail investors, who have seen their returns from equity come under pressure of late, could also consider these products as interest rates firm up. These deposits offer 175-300-basis points higher interest than that of a large bank.

A 44-month deposit of Bajaj Finance pays 7.35%, while a HDFC Bank FD pays 5.6% for a 3-5-year tenure, giving an investor a spread of 175 basis points over bank deposits.

Deposit rates are higher for smaller finance companies with lower credit ratings. Given that rate hikes by the RBI might not be over yet, investors should spread their investments and should not put all money in long tenure deposits at the moment.

First Published: 16 Jun 2022, 09:48 AM IST