We are living in unprecedented times. Businesses are getting impacted rapidly, interest rates are falling and a bank like Yes Bank, had to be bailed out.
Even as interest rates are low, it is time to look at deposits from non banking finance companies, which are offering interest rates that are better than most banks. Here are 3 AAA rated deposits from NBFCs that are rather safe and offer interest rates more than that of banks.
1. Bajaj Finance
The deposits of Bajaj Finance are rated AAA by CRISIL and ICRA. A 1-year deposit fetches an interest rate of 7.60 per cent, while a 2-year deposit gives an interest rate of 7.65 and you receive an interest rate of 7.80 per cent on a 4 and 5 year deposit.
Banks are at the moment offering you an interest rate of 6 per cent. So, in a way the interest rates on these deposits are far better.
You can choose between cumulative and annual or quarterly payment. Investors who already have a regular source of income should look for the cumulative option.
Being a part of the Bajaj group the deposits of the company are relatively secure.
India's largest housing finance company, HDFC Is offering an interest rate of 7.15 per cent across tenures. So, a 1, 2, 3,4 and 5 year deposits are being offered an interest rate of 7.15 per cent. Senior citizens are entitled to an extra interest rate of 0.25 per cent.
The deposits of HDFC are very much secure, given the strong brand equity and its leading position. The company is also the main promoter of HDFC Bank and HDFC Asset Management Company.
We do not foresee a great risk in investing in these deposits, given the strog position of the company.
3. LIC Housing Finance Company
LIC Housing Finance Company is the second largest housing finance company in India. Like HDFC it enjoys a very strong brand equity. The deposits are rated FAAA by Crisil, which is the highest rating for safety.
LIC Housing Finance offers an interest rate of 7.50 per cent for 1 year and 7.60 per cent for other tenures.
Senior citizens are entitled to an extra 0.25 per cent.
TDS on company fixed deposits
It is important to remember that company fixed deposits attract a TDS, if the interest income crosses Rs 5,000. Investors can therefore either submit form 15G or form 15H, as the case must be. It is important for investors to remember that they should not submit form 15G or Form 15H, unless their income is below Rs 2.5 lakhs.
In the case of banks, TDS is deducted if the interest income crosses the Rs 10,000 mark. It's also important to remember that in all of the above cases, it would be better to stick to short term tenures of 1 to 2 years, rather than a long-term tenure.