INSUBCONTINENT EXCLUSIVE:
Mahindra Finance, offers interest rate on fixed deposit at 7.95 per cent for a 15-month fixed deposit.
For individual depositors, a bank fixed deposit (FD) is considered the safest
form of investment, especially with a large commercial bank such as State Bank of India (SBI)
The income from the bank FD is not only safe, but also accessible at any time since the saving instrument can be redeemed, even prematurely
albeit at the cost of some interest income
However, the large banks offer relatively lower fixed deposit (FD) returns such as SBI offers only 6.65 per cent interest income per annum
In such a scenario, the depositors can embrace not-so-popular, but high-yielding alternative of depositing fixed deposits (FDs) with small
finance banks and/ or non-banking financial companies (NBFCs).Unlike the large commercial banks such as SBI, small finance banks offer far
higher interest rates on their fixed deposits (FDs), which are as high as 9 per cent in some cases
The small finance banks are just like the large commercial banks, but the only difference lies in the fact that they are not permitted to
lend to the corporate buyers, thus sparing them the big ticket loans as well as the exposure to higher non-performing assets.Some of the
most prominent small finance banks include Fincare Small Finance Bank, AU small finance bank, Ujjivan Small Finance Bank and Equitas Small
Finance Bank.For individual depositors, small finance banks offer a boon to the investments for high rate of interest, sometimes as high as
PublicSenior Citizens7 days to 45 days4.00%4.50%46 days to 90 days4.00%4.50%91 days to 180 days6.00%6.50%181 days to 364 days7.00%7.50%12
months to 15 months8.00%8.50%15 months 1 day to 18 months8.25%8.75%18 months 1 day to 21 months8.50%9.00%21 months 1 day to 24
months8.75%9.25%24 months 1 day to 36 months9.00%9.50%3 years 1 day to 5 years8.00%8.50%5 years 1 day to 7 years7.00%7.50%5 years 1 day to 7
years7.00%7.50%Not only small finance banks, the non-banking financial companies also offer high interest rates, usually at par or even
higher than what the small finance banks offer
However, the deposits on small finance banks are considered relatively safer in comparison to those with NBFC.Interest rate and risk: As one
realises that the interest rate offered by NBFC is slightly higher than what is offered by the small finance banks, however, the marginally
higher interest income comes at slightly higher risk that one has to bear for pocketing some extra bucks.Sample this: The KTDFC and Mahindra
Finance (both NBFCs) offer interest rate on fixed deposits (FDs) to the tune of 8.25 per cent and 7.95 per cent per annum while the small
finance banks such AU small finance bank and Equitas offer slightly less interest rates upto 7.15 per cent and 7.5 per cent.Tax factor:
Interest incomes on both NBFCs and small finance banks are taxable at the rate of tax slab one falls under
A person falling under the 5 per cent income tax slab will be made to pay tax at the same rate on his/her interest income, while the one who
falls under 30 per cent tax slab will pay income tax at the same rate
The interest income up to Rs 10,000 is non-taxable for non-senior citizens, while for the senior citizens, the tax free interest income
limit is Rs 50,000.Before choosing an NBFC, the depositor must check if the credit rating (that determines the ability to refund the loan)
The high credit-ratings-bearing NBFC deposits are safer than the ones without them.Bajaj Finserv, for instance, offers an interest rate up
to 7.85 per cent, which is nearly 220 basis points higher than the SBI FD interest rate of 6.65 per cent for one year duration
Also, Kerala Transport Development Finance Corporation (KTDFC) offers an interest rate of 8.25 per cent for one-year, two-year and
three-year fixed deposit (FDs)
The long duration fixed deposits (FDs), for four years and five years, fetch an interest rate of 8 per cent, according to
www.ktdfc.kerala.gov.in.Kerala Transport Finance Development CorporationTenureInterest Rate(p/a)1 year8.25%2 years8.25%3 years8.25%4
years8%5 years8%Shriram Transport Finance Fixed Deposit (FD) Interest RatesTenureInterest rate(non-cumulative)12 months7.65%24 months7.65%36
months8%48 months8%60 months8.25%Another NBFC, Mahindra Finance, offers interest rate on fixed deposit at 7.95 per cent for a 15-month fixed
deposit.RBI, in a recently released newspaper stated: "If your grievance regarding deficiency in service against any deposit-taking NBFC
registered with the RBI, is not redressed within 30 days or you are not satisfied with the reply given by the NBFC concerned, you can
approach the NBFC ombudsman with complete details at the address: The NBFC Ombudsman (North Zone) c/o Reserve Bank of India 2nd floor, 6,
Sansad Marg, New Delhi-110001
Phone number Ph: 011-2372 4856, email: nbfcconewdelhi@rbi.org.in".
