Bajaj Finance, a non-banking finance company (NBFC), has raised interest rates on term deposits (FD) on various mandates, effective July 1.
This is the third deposit rate hike by Bajaj Finance since May. With that, his FD rates on various terms are up 30-45% from the one announced in May. The increase will apply to both new and renewal deposits.
Bajaj Finance’s deposits have the highest credit rating, AAA/Stable by CRISIL and AAA (Stable) by ICRA. Deposits with NBFCs are not covered by the Deposit Insurance and Credit Guarantee Corporation’s insurance coverage of up to ₹5,000,000. However, a higher credit rating provides some level of comfort.
What is offered
Bajaj Finance offers cumulative and non-cumulative FDs (the latter with monthly, quarterly, semi-annual and annual interest payments) of the following durations: 12-23 months, 24-35 months and 36-60 months. Apart from that, it also offers tenure-specific deposits such as 15-month, 18-month, and 22-month deposits, which offer slightly higher rates than its similar-tenure deposits. For example, the 15-month cumulative FD offers 6.4%, compared to 6.2% on the 12-23 month FD.
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After the latest hike, among Bajaj Finance deposits, 44-month cumulative and non-cumulative FDs (with annual interest payments) offer the highest rate of 7.5%.
Seniors will be offered an increased rate of 7.75% on these deposits. They enjoy an additional interest rate of 0.25% on all Bajaj Finance deposits.
Another NBFC, Shriram Transport Finance (STFC), also revised its deposit rates in May.
The rates offered by STFC on deposits of certain durations are higher than those offered by Bajaj Finance (see table). For cumulative deposits, while interest is compounded annually in the case of Bajaj Finance, it is compounded monthly in the case of STFC. This makes the effective rate of return on STFC deposits even higher. However, STFC’s FDs are rated AA+ (Stable) by ICRA and AA+/Stable by India Ratings and Research, one notch below Bajaj Finance’s deposit rating.
Interest income from time deposits is taxed at the rate of your income tax slab. This makes them more suitable only for those in the lower tax brackets.
