We are in the final phase of peak interest rates. Though the RBI maintained status quo for the 10th consecutive time, shifting its policy stance from withdrawal of accommodation to neutral could probably be a teaser for rate cuts in the succeeding meeting. And, for the attention of investors looking for stable fixed returns, the clock is ticking to lock in on these high interest rates before they begin to slide.

In this backdrop, the long-term deposits offered by Sundaram Home Finance make a compelling case to invest for those investors looking for safety coupled with fixed returns.

Rated AAA (the highest) with a Stable outlook since January 2023 by CRISIL and since June 2022 by ICRA, Sundaram Home Finance’s fixed deposits are amongst the safest in the market.

Sundaram Home Finance operates in the housing finance segment. In FY24, the company added small business loans and affordable housing loans, especially in tier-3 and -4 towns, onto its offerings, while scaling up loans against property.

FD schemes

Sundaram Home Finance offers fixed deposits under two schemes – Cumulative Deposit Scheme (CDS) and Regular Deposit Scheme (RDS).

While CDS compounds interest annually and paid upon maturity, RDS calculates interest till the last day of the period and pays interest regularly. Thus, yields are naturally higher under CDS and suits individuals seeking to save and grow their corpus, while RDS still beats regular savings accounts and is suited for pensioners and senior citizens who seek regular payouts, while protecting their corpus.

Under CDS, senior citizens are offered 7.95 per cent for a tenure of 12 months and 8.25 for tenures ranging from 24 months to 60 months, while others are offered in the 7.45-7.9 per cent range.

The RDS scheme offers monthly pay-out options for tenures starting from 36 months, while quarterly pay-out options are available across all tenures. However, interest rates are comparatively lower for monthly payouts compared with quarterly payouts. This scheme offers a maximum of 7.95/8.01 per cent across monthly/quarterly payouts for senior citizens, while it is 7.63/7.68 per cent for others.

The minimum deposit amount is ₹10,000 and in multiples of ₹1,000 thereafter. Depositors can also avail the “Auto Renewal Facility” where the deposit will automatically be renewed for the same tenure at the interest rate prevailing on the date of maturity. TDS would be applicable on interest payments beyond ₹5,000. You will require your PAN and Aadhaar for opening the deposit account with Sundaram Home Finance.

The scheme has a lock-in period of three months, and any premature withdrawal can be made only post three months from the date of deposit/renewal. And interest paid will be at a lower rate and not at promised levels, on such premature withdrawals.

How to apply

Sundaram Home Finance does not extend an option to apply online. Hence, prospective depositors will have to fill the application form, which is available online and visit the nearest branch to open a deposit with the company.

Our take

Amongst other AAA-rated fixed deposits in the market, Mahindra Finance offers the highest interest rate at 8.05 per cent for 42 months for cumulative deposits for other than senior citizens. The highest interest rate offered by ICICI Home Finance in this segment is 7.65 per cent for tenures between 36 and 60 months, while Sundaram Finance and LIC Housing Finance offer 7.75 per cent for 24-36 months and three-five years respectively.

While we at bl.portfolio cover various stable income products across banks, small finance banks, non-banking financial institutions and home finance companies, the intention has been to provide options and recommend not to put all your eggs in one basket.

Investors looking for diversification could consider investing a portion of their debt allocation in this product, preferably for longer tenures, and preferably in the cumulative deposit scheme, to lock in on these relatively higher interest rates and earn stable, safe returns.

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