While investing in Fixed Deposits, we look at the interest rates provided by the lenders. We have a common notion of banks as a better form of investment for fixed deposits as they have been in the market for many years. After the advent of Non-Banking Financial Companies (NBFCs) in the market, the idea of depositing the money has changed drastically in the last few years.
The banks used to be the only source for investments as there were no NBFCs earlier. Fixed Deposits became a monopoly between the banks and the people. Before the introduction of NBFCs, people had accepted the fixed deposit interest rates provided by the banks for the returns. Nowadays, the NBFCs have taken the command and have gained more popularity due to the high-interest rate offered in comparison to the banks.
As NBFCs are not regulated by the Reserve Bank of India (RBI), they can set the interest rates according to their business convenience. Hence, they provide better and higher fixed deposit interest rates than the banks. The banks provide 6 to 7 percent interest rates for fixed deposits, whereas, the NBFCs provide 8 to 8.5 percent interest rates for fixed deposits.
While investing in fixed deposits, you need to make sure that you know about the FD account benefits provided by the corporate lenders.
Higher Returns: While investing in FDs, we look at the fixed deposit interest rates provided by the lenders. As we all know the higher the interest rates the higher the returns. The Corporate Fixed Deposits are known for their high-interest rate FDs, which means if you invest in a company fixed deposit, there are chances that you can get higher returns than the FDs from the banks.
Liquidity: Circumstances cannot be predicted, and sometimes when there is an emergency we tend to manage funds from every source available. While, one such source is an FD, at the time of emergency people who have invested in fixed deposits, withdraw their money before the maturity period gets over. Withdrawal of money before the maturity period can result in penalties, which means, if you withdraw money from your fixed deposit account before the maturity period gets over, you will have to pay a penalty to the financial institution.
If you invest in Corporate Fixed Deposits, you can avail a low lock-in period, and with a low lock-in period, you can withdraw the money before the maturity period, but only after you cross the lock-in period successfully.
Interest Credit: There are times where we cannot get the grip of the unfortunate events and cannot manage our monthly expenses with our salary. In such situations, we are often pushed to the decision of withdrawing the FD amount. While there are other ways that you can manage your finances with the help of your FD, you can also change your interest credit duration according to your needs. You can use the fixed deposit calculator to manage your interest credit duration, which will help you estimate and manage your returns in your hard times.
Lower Risks: Most people are reluctant to open an FD account with the NBFCs, as they fear that NBFCs can be risky as they are not regulated by the Reserve Bank of India (RBI). To avoid missing the chance of availing a better FD option due to insecurities, you can check the credit ratings given to the NBFCs for better security assurance.
Due to the flexibility provided by the NBFCs, it would be beneficial to invest in corporate fixed deposits. The banks can be reliable but when it comes to high fixed deposit interest rates, NBFCs can be a better choice if you are looking for higher returns with reliability.