NBFC vs Financial Institutions: Which Gives the Highest Interest Rate for Fixed Deposit?

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Fixed deposits top the list of the safest investments schemes offering considerable returns. Being such secured investments, you can open a fixed deposit account from both NBFCs and other financial institutions. However, the FD interest rates offered by NBFCs is slightly higher than the rates offered by others.

Reasons to invest in FDs offered by NBFCs

NBFCs offer attractive interest rate along with additional benefits for senior citizens. Besides, with the recent slash in RBI’s repo rate, the FD interest rates of financial institutions significantly dropped, affecting the investors.

That being said, several NBFCs offer an interest rate of up 8.35% on fixed deposit accounts along with an additional 0.35% for senior citizens – Bajaj Finance being one amongst them. Besides, this NBFC offers guaranteed returns backed by the highest credibility ratings – MAAA by ICRA and FAAA by CRISIL.

Moreover, being independent of market fluctuations, you can easily use a fixed deposit calculator to estimate your assured returns. You can start with an investment as low as Rs. 25,000 and grow your corpus over a flexible tenor ranging from 12 months and 60 months.

Fixed deposits have always been a preferable option while planning for higher returns independent of the market’s volatility and unsure trajectory. Irrespective of the drop or rise in the stock market, investors can enjoy substantial returns that have been pre-determined with the help of the FD calculator.

Also, the investment option is by far the most convenient, and individuals can choose to deposit their amount with the help of debit cards, cheques, etc. or any other preferred payment method. Furthermore, to meet financial crisis you can also opt for premature withdrawals from a single deposit or take a loan against your fixed deposit.

Nevertheless, it is better not to opt for premature withdrawals as you face interest loss, penalties, growth prevention, etc. Keeping that in mind, before you break your FDs consider reading the terms and conditions offered by your NBFC. Also, consider alternate options that would fulfil your monetary crisis.

NBFCs also offer variable options to help you receive your interest payouts periodically, and you can choose between non-cumulative and cumulative FDs. While non-cumulative FDs offer you monthly, quarterly, half-yearly or yearly interest payouts; cumulative FDs provide you compounded interest rate every year to be realised only at the end of the tenor.

Considering the above reasons, it is beneficial to choose company fixed deposits rather than bank FD.

Factors affecting FD returns

In spite of being independent of the volatile market, your fixed deposit returns depend on several other factors, such as –

  1. The amount you invest – Higher investments yield substantial returns.
  2. For the period you invest – The higher the tenor, the higher the FD interest rates. For instance, FD accounts held for more than 15 months will attract higher interest rates than deposits made for 12 months.
  3. Age of the investor – As mentioned above, account holders above the age of 60 gain higher interest rates along with other benefits compared to FD account holders below the age of 60.

Besides, opting for auto-renewals also helps you earn higher interest rates along with the above mentioned factors.

Apart from substantial returns, FDs offer host of other benefits, tax exemptions being one of them. For interest amount earned over and above Rs. 40,000 (except for investments with a tenor of 5 years), the NBFC will process TDS deductions.

In case your income does not fall under the income tax payable threshold, you can claim your deductions by submitting Form 15G or Form 15H (for senior citizens) to your NBFC.

On FD accounts, NBFC also offers convenient application process, and you can apply online by sharing minimal financial and personal details and making the payments via several convenient channels to invest in your fixed deposit account.

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