Over the past year, fixed-income instruments have been in the spotlight due to rising interest rates and volatile equity markets. In this period, the fixed deposit (FD) has become attractive again. Although bank deposits are favoured by investors, one can also consider FD products in stable NBFCs. Bajaj Finance is one such NBFC that has hiked its interest rates on 3–5-year tenure from May 10, 2023 onwards.
Features
Bajaj Finance recently hiked its interest rate offered on 3–5-year deposits by almost 40 basis points to 8.05 per cent for depositors below the age of 60, whereas the special deposit scheme for 44 months is offering a rate of 8.35 per cent. It offers an additional 0.25 per cent interest across tenures to senior citizens, which means the maximum interest rate they can get is 8.6 per cent per annum for the 44 months tenure. The minimum amount to start an FD is ₹15,000.
The interest rate offered by Bajaj Finance is higher than most banks and AAA-rated NBFCs in 3-5 years tenure. Only a few SFBs (Small Finance Banks) are offering rates close to Bajaj Finance, for example, Fincare Small Finance Bank is offering 8.25 per cent per annum in this tenure.
The company offers two payout options: one is the cumulative option, where the total interest and principal will be paid on maturity. The second option is non-cumulative one where the payout will be at regular intervals- monthly, quarterly, half-yearly, and annual payout. The FDs here can be started by resident individuals, HUFs, Trusts, Associations, societies, partnership firms, sole proprietorship, and family trusts.
Pros and cons
Fixed deposit is generally considered liquid as it can be withdrawn during emergency. Bajaj Finance FDs also can be withdrawn after a lock-in period of 90 days. The company also offers loans against deposits where the depositors can avail up to 75 per cent of the deposit value as a loan. The company has ICRA-AAA (Stable) and CRISIL AAA/STABLE ratings, which implies the going concern nature of the business and lesser default risk.
Also read: Should you go for non-callable deposits?
As an NBFC, Bajaj Finance does not have DICGC cover of ₹5 lakhs on deposits that banks offer. Further, although the FD can be liquidated before maturity (after a lock-in of 3 months), there will be a penalty to do so.
If the deposit is being withdrawn during 3-6 months after making the deposit, then no interest will be paid for the period (except in case of death of the depositor) and if the deposit is being withdrawn within 6-12 months of starting the deposit then the interest applicable will be 3 per cent lower than the minimum ROI offered.
However, if the Deposit is prematurely withdrawn within 12-60 months, then the interest paid will be 2 per cent lower than the ROI of the completed deposit tenure.
How to get started?
Depositors willing to start an FD with Bajaj Finance may visit its website and click on the “Open FD” option, submit their phone number, and verify through OTP. The depositor will then have to fill in the investment amount, tenure, and payout frequency, and complete the KYC process.
Also read: Lenders offer lucrative rates on FDs amid rising competition, new tax norms
After agreeing to the terms and conditions, depositors can complete the transfer of funds. They will get an acknowledgement after the successful transaction and within 3 working days, an e-FDR i.e., electronic fixed deposit receipt will be sent to the registered e-mail ID.
Should you go for it?
Depositors can start an FD with Bajaj Finance due to its attractive interest rates. Bajaj Finance, being an AAA-rated NBFC with a stable outlook, has a lesser chance of credit default risk, and therefore lack of DICGC cover is not a major disadvantage.