TDFC Fixed Deposit. TDFC FD: Hop on to it for higher returns

If you have an appetite for risk and would like to earn better returns than your bank fixed deposit (FD), consider investing in FDs of the Tamil Nadu government’s Transport Development Finance Corporation (TDFC).

What make these FDs worth investing in are their attractive returns. The deposit offers 9.5-10 per cent interest for periods ranging from 24-60 months. This is unmatched by banks, the best of which offer only 9.25-9.4 per cent interest on deposits of the same tenure.

Senior citizens, that is, those aged 58 years and above, are entitled to additional interest of 0.25 per cent on two-year deposits and 0.50 per cent on three- to five-year deposits.

TDFC is offering these FDs under two schemes – in the first scheme, the two-year fixed deposit alone comes with a quarterly payout option (interest compounded monthly). The three- to five-year deposits come with three payout options − monthly, quarterly and annual (monthly compounding).

Under the second scheme, called a ‘Money Multiplier Scheme’, interest on all the deposits is compounded on monthly basis and paid out on maturity.

Investors need not consider one-year deposits of TDFC as banks such as DCB Bank and ING Vysya Bank already offer the same 9.25 per cent rate of interest. The bank deposits are safer as they have deposit insurance cover for an investment (principal and interest together) of ₹1 lakh.

While nothing beats the safety of bank FDs, deposits offered by TDFC are reasonably safe too. TDFC is a hire-purchase finance company that raises funds from people and institutions through deposit schemes and provides funding to state transport undertakings in Tamil Nadu. The fact that it is a profitable non-banking finance company fully owned by the Government of Tamil Nadu and scores well on some broad fiscal indicators lends comfort.

There are nevertheless a few counts on which bank FDs fare better than TDFC deposits. One, while you need a minimum of ₹10,000 for opening an FD with TDFC, bank FDs can be opened for as little as ₹1,000. Second, banks offer more favourable terms on loans against the deposit. You can take a loan for only up to 75 per cent of the FD amount with TDFC, three months after the date of deposit. Some banks, on the other hand, may offer you a loan for even up to 90 per cent of the deposit amount.

You can get the deposit application form from the registered office of TDFC in Chennai or download it from the Corporation’s website. Depositors in Chennai can pay the deposit amount either through a local cheque or banker’s cheque and those outside Chennai can do so through cheques payable at par or demand drafts.

You will be paid the interest by warrants through select branches of HDFC Bank and Indian Bank and through the electronic clearing system in cities where such a facility is available. In case of depositors outside Chennai, where the interest income exceeds ₹10,000, payment will be made through at par cheques.