The company fixed deposit is an alternative investment option with higher yield than bank fixed deposits.
Bank fixed deposit interest rates have fallen considerably over the last one year. Those investors, especially senior citizens, who look for regular income options are now looking for alternate investment options. The company fixed deposit is an alternative investment option with higher yield than bank fixed deposits. Such FDs are offered by both manufacturing and NBFCs and have a tenure from 6 months to 5 years. Some of them are rated AAA but the ratings may change over time. The company FD offers higher return than bank FDs but at the same time carry higher risks. Unlike the bank FD which has the backing of the banking system and insurance coverage of up to Rs 5 lakh under DICGC rules, the company FDs do not enjoy any such privilege.
SBI FD is currently offering an interest rate between 5.10 per cent and 5.40 per cent for tenure between 1 year and 10 years. For a senior citizen, the rates are between 5.60 per cent and 5.80 per cent between 1 year and 5 years, while for deposits between 5 year and 10 years, the rate of interest under special deposit scheme is 6.2 per cent. Similarly, other leading commercial banks such as ICICI Bank or HDFC Bank are offering a rate of interest of around 6 per cent on the FDs.
Here are a few alternative FD options with better yields than bank fixed deposits.
Bajaj Finance Fixed Deposit FD
Currently, the annual interest rate on Bajaj Finance Fixed Deposit is between 6.9 per cent and 7.10 per cent depending on the tenure of 12 months to 60 months. Additionally, rate of interest can go up to 7.20 per cent for online deposits and 7.35 per cent for senior citizens. The minimum deposit required to invest in a Bajaj Finance Fixed Deposit is Rs. 25,000. One may invest online by accessing the company website.
Shriram Transport Finance Company FD
Currently, the annual interest rate on Bajaj Finance Fixed Deposit is between 7.6 per cent and 8.5 per cent depending on the tenure of 12 months to 60 months. Additional interest of 0.25 per cent will be paid for Senior citizens who have completed age of 60 years on the date of deposit or renewal. For a 60-month cumulative FD, the nominal interest rate is 8.11 per cent which effectively yields 10.07 per cent on maturity.
Mahindra & Mahindra Financial Services FD
The Mahindra & Mahindra Financial Services (MMFSL) FDs are of two types – Samruddhi Fixed Deposits, where investments are made offline while the other FDs are Dhanvruddhi Deposits which are available only online through the company’s website.
Currently, the online Dhanvruddhi Deposits are offering 6.8 per cent to 7.3 per cent for deposits ranging between 15 months and 40 months, with yield going up to 7.96 per cent. On the Samruddhi Fixed Deposits, the rate of interest is between 6.6 per cent and 7.15 per cent for deposits between 12 and 48 months.
There is 0.25 per cent additional interest rate for senior citizens for Samruddhi Fixed Deposits and Dhanvruddhi Deposits where the mode of investment is only online.
Some of the other company FDs that one may consider are HDFC Limited, ICICI Home Finance FD and Sundaram Finance company FD. One should, however, be careful while investing in company FDs as they are riskier investments. It is better to invest for a shorter period and opt for monthly interest payments and above all spread the amount across more reputable and companies which are listed on stock exchanges. These steps may reduce the risk if not give remove it completely.