Are you worried about low FD rates and looking for investment options , which can give you higher return than bank FDs.
In an interview with Money9, Anil Chopra, group director, financial wellbeing, Bajaj Capital, talks about the fixed options available.
Edited excerpts:
Q: People are worried about low rate of return. Where can they invest to get interest rate higher than bank deposits?
Chopra: Currently, interest rates are so low that people are not getting any positive, real rate of return.
Currently, the most popular, fixed income option, which is one-year fixed, is giving 5.5% return and inflation itself is around that level. And then, if there’s income tax also, the real rate of return is almost negative.
Most fixed income-oriented individuals are struggling to find better options. There are a few options which are only for senior citizens. And then there are options which everyone can take. The most popular option which is available for everyone is the floating rate, savings bonds. The other beautiful thing about it is that there is no upper cap or maximum limit on investment.
Now, the most important feature, how much return could you expect? Currently, the rate being offered is 7.15%, which is significantly higher than the one-year banker period, which is 5.5%. But these bonds come with the other terms and conditions also. One is that the period is for seven years, so seven years.
Every quarter, the interest rate is announced in advance. Interest rates on these floating rate savings bond is 35 basis points higher than the interest rate being offered on national savings certificates. So that is one option, which is available to all.
The second option, which again is very, very popular are some highly reputed, AAA-rated corporate deposits. So, these corporate deposits come from big names such as HDFC Limited or Bajaj Finance Limited. So these are some of the big names which are also accepting deposits from public. And the periods are ranging from one year to seven years. Interest rates being offered are in the range of 6% to 8% maximum going up to around 8%. But make sure that you diversify do not invest more than 10% of your total portfolio in one company.
Q: How safe are corporate deposits? As we saw earlier in DHFL and other cases, the companies defaulted in payment. So, when one is going for corporate deposit what points should one consider?
Chopra: One should look at three or four factors. First is the rating. Obviously rating has to be minimum AA plus or AAA, but that rating alone cannot guarantee that you get back your money. The other thing is track record of the company and the last do not invest more than 10% of your total portfolio in one company.
Q: If one wants to invest in corporate deposits, can one do it online or what options are available to invest in these avenues?
Chopra: Companies are now improving their technological abilities to offer it online. So, yes, people can invest directly online. But there are other agencies like distributors or agents, which these companies have appointed. So they can always come to the help of depositors in terms of giving them support for filling up their form, ensuring that the proper nominees, capture their address, their bank details, etc.
