- Date : 17/07/2022
- Read: 3 mins
NBFC interest rates Vs Banks
The recent rise in the interest rates by the RBI was unprecedented. The central agency has hiked the repo rates by 0.9% in the last three months. Further, the recent hike of 0.4% in May 2022 came as an unscheduled policy review, taking the finance pundits by storm. Also, the latest hike of June 2022 increased the repo rate by another 0.5% in a scheduled MPC committee meeting. The reason suggested by the Central bank was the high inflation rates. In April 2022, the CPI inflation rate was 7.79%. The inflation rate in May 2022 trickled down to 7.04%, still higher than the RBI prescribed upper threshold of 6%.
So, if you are an investor wondering how to get fixed returns to beat inflation, you need to consider NBFCs. NBFCs have a higher chance of default than the banks, and therefore the NBFC FD rates are better than the banks. But you should understand that if you invest in a good NBFC, the chances of default will be low, and the FD rates will be higher.
There are several NBFCs which give higher FD rates than banks. Here are a few NBFCs: -
1) Shriram Transport Finance Company Limited (CRISIL AA+/Stable)- The company offers FDs with interest rates of up to 7.9%. For senior citizens, the interest rates can be as high as 8.4%. Senior citizens are eligible for a 0.5% extra return on the FDs. Also, the company offers an additional 0.25% extra interest on renewals. For the employees and their family members, the interest rate on FD is higher by 0.15%. Thus, the interest rates offered on NBFCs are almost 2% higher than the prevailing FD rates in banks.
2) Shriram City Union Finance ([ICRA]AA)- The interest rate on FD of this NBFC goes as high as 8.4%. This includes a bonus of 0.5% for senior citizens. The NBFC is rated by the top credit rating agencies in India. Currently, the credit ratings are high, and one should check the credit rating of the NBFC before investing.
3) Muthoot Capital (CRISIL A/Stable)- Muthoot Capital is a well-known NBFC in India. The company offers interest rates of up to 9.05% on their FDs. They offer easy withdrawals, guaranteed returns, and flexible interest rates, among other features.
4) Bajaj Finance (CRISIL AAA/Stable)- Bajaj Finance is a well-known NBFC in India. They are known for stellar returns to the equity shareholders because of the consistent growth rate and steady compounding. The NBFC offers FDs with interest rates of up to 7.6%.
Related: https://www.tomorrowmakers.com/other-investments/best-rates-bank-fixed-deposits-invest-india-article
Conclusion:
In the high inflation scenario, you need higher returns to beat the inflation. NBFCs offer higher interest rates than banks on their FDs. You should select the NBFCs with the lowest risk of default to get inflation-adjusted interest rates.
Related: https://www.tomorrowmakers.com/other-investments/banks-fds-and-nbfc-fds-how-do-they-differ-listicle
Disclaimer: This article is intended for general information purposes only and should not be construed as investment advice. You should separately obtain independent advice when making decisions in these areas
The recent rise in the interest rates by the RBI was unprecedented. The central agency has hiked the repo rates by 0.9% in the last three months. Further, the recent hike of 0.4% in May 2022 came as an unscheduled policy review, taking the finance pundits by storm. Also, the latest hike of June 2022 increased the repo rate by another 0.5% in a scheduled MPC committee meeting. The reason suggested by the Central bank was the high inflation rates. In April 2022, the CPI inflation rate was 7.79%. The inflation rate in May 2022 trickled down to 7.04%, still higher than the RBI prescribed upper threshold of 6%.
So, if you are an investor wondering how to get fixed returns to beat inflation, you need to consider NBFCs. NBFCs have a higher chance of default than the banks, and therefore the NBFC FD rates are better than the banks. But you should understand that if you invest in a good NBFC, the chances of default will be low, and the FD rates will be higher.
There are several NBFCs which give higher FD rates than banks. Here are a few NBFCs: -
1) Shriram Transport Finance Company Limited (CRISIL AA+/Stable)- The company offers FDs with interest rates of up to 7.9%. For senior citizens, the interest rates can be as high as 8.4%. Senior citizens are eligible for a 0.5% extra return on the FDs. Also, the company offers an additional 0.25% extra interest on renewals. For the employees and their family members, the interest rate on FD is higher by 0.15%. Thus, the interest rates offered on NBFCs are almost 2% higher than the prevailing FD rates in banks.
2) Shriram City Union Finance ([ICRA]AA)- The interest rate on FD of this NBFC goes as high as 8.4%. This includes a bonus of 0.5% for senior citizens. The NBFC is rated by the top credit rating agencies in India. Currently, the credit ratings are high, and one should check the credit rating of the NBFC before investing.
3) Muthoot Capital (CRISIL A/Stable)- Muthoot Capital is a well-known NBFC in India. The company offers interest rates of up to 9.05% on their FDs. They offer easy withdrawals, guaranteed returns, and flexible interest rates, among other features.
4) Bajaj Finance (CRISIL AAA/Stable)- Bajaj Finance is a well-known NBFC in India. They are known for stellar returns to the equity shareholders because of the consistent growth rate and steady compounding. The NBFC offers FDs with interest rates of up to 7.6%.
Related: https://www.tomorrowmakers.com/other-investments/best-rates-bank-fixed-deposits-invest-india-article
Conclusion:
In the high inflation scenario, you need higher returns to beat the inflation. NBFCs offer higher interest rates than banks on their FDs. You should select the NBFCs with the lowest risk of default to get inflation-adjusted interest rates.
Related: https://www.tomorrowmakers.com/other-investments/banks-fds-and-nbfc-fds-how-do-they-differ-listicle
Disclaimer: This article is intended for general information purposes only and should not be construed as investment advice. You should separately obtain independent advice when making decisions in these areas
