Bank interest rates have seen a stunning fall in the last few years. The maximum interest rates that State Bank offers on its fixed deposits is just 6.5 per cent. With such low interest rates, it becomes almost impossible to earn anything much from bank FDs.
It is therefore important to look beyond bank Fds. Here are 7 fixed deposits that offer better interest rates than bank fixed deposits.
1. Jana Small Finance Bank
This is a small finance bank, which largely caters to the micro finance area. The interest rates particularly on its short term deposits is very attractive. A 199 deposit fetches you an interest rate of 8.25 per cent, whereas in any other bank it would range between 5 and 6 per cent.
So, if you are looking to park money for the short term, this is a good bet. A 1-year deposit too fetches a very good interest rate of around 8 per cent.
On the other hand, if you are looking at slightly more than 1 year, say for example 499 days, you will receive an interest of 8.50 per cent.
Small Finance Banks are regulated by the RBI and hence can be considered as reasonably safe.
A word of caution: Do check if there is a lock-in on some of the tenures. If so, it's best to avoid.
2. Mahindra and Mahindra Financial Services
Crisil has accorded a FAAA rating for these deposits, which means they are safe. A 3, 4 and 5 year deposit fetches you an interest rate of 8.25 per cent, which is rather very good for a well rated NBFC.
Given that the company is a part of the M&M group, the deposits are very safe. You can invest a minimum of Rs 10,000 initially in the deposit and in multiples of Rs 1,000 thereafter.
We suggest that you invest for the long-term, given the way interest rates are falling. Say for example, if you have locked money in these Fds for three years and should interest rates fall, you would not be worried.
3. Suryoday Small Finance Bank
This is a bank that offers an interest rate of 9 per cent on a 5-year deposit. A 1 year deposit fetches you an interest rate of 8.25 per cent, while 2 year to 3 year deposit gives you an interest rate of 8.50 per cent.
The question that readers ask is: Are small finance banks safe to invest. These Banks are licensed by RBI and have to meet many conditions including statutory liquidity ratio. In fact, 50 per cent of their loans have to be to small ticket loans, which is not more than Rs 25 lakh. This means they largely cater to very small businesses and individuals.
4. Shriram Transport Fds
An interesting feature of the Shriram Transport Fds is that the interest rate is at monthly rests, which means your yield tends to go higher. So, a 24 month deposit offers you an interest rate of just 7.72 per cent with monthly rests, but, your effective yield works to a solid 8.08 per cent.
Similarly, a 3-month deposit gives you an interest rate of 8.28 per cent, but, your yield works to 9.16 per cent.
The deposits are FAAA rated by Crisil, which means the highest possible rating. Company Fds tend to attract a TDS, if the interest income crosses the Rs 5,000 mark.
5. PNB Housing Finance
PNB Housing Finance too tends to offer a very attractive interest rate. The interest rate on a 36-month deposit is 8.10 per cent, while the 12-35 month period deposit attracts an interest rate of just 8 per cent.
The interest rate is much better than bank deposits and
Investors can avail a loan facility of upto 75 per cent of the deposit, as is the case with all FDS.
You are allowed to cancel the FD after three months, after opening, but this is at the discretion of the company. Like Shriram Transport Fds, these have the highest rating of FAAA by Crisil.
6. LIC Housing Finance
LIC Housing Finance too offers decent interest rates, if not very attractive. The 1-year deposit offers an interest rate of 7.50 per cent, a 2-year deposit offers an interest rate of 7.55 per cent and a three year deposit offers an interest rate of 7.60 per cent.
These deposits are exceedingly safe as the company is majority owned by LIC. Investors, can invest in the deposit for good long-term returns.
Ideally, one should invest for the long-term given that interest rates are likely to be cut by the RBI even further.
7. Sundaram Finance
This FD offers an interest rate that is just marginally higher than banks. A 1 year deposit fetches an interest rate of 7 per cent, while a 2-year deposit gives an interest rate of 7.25 per cent and so does a 3-year deposit.
Strong backing and a renowned group makes the deposits very safe.