Fixed deposits are investment instruments with several benefits like flexible tenors, assured returns and the facility of loan on your deposit. As your money is locked-in for a specific tenure, fixed deposits are also called term deposits. The amount that you invest in any fixed deposit earns interest on a predetermined basis. Not only do fixed deposits provide a higher interest rate as compared to traditional savings account, but are also safer than other investment avenues such as mutual funds. The principal amount remains unaffected by any market volatility, thus making it one of the most popular choices of investment in India.
Who offers fixed deposits to customers?
Fixed deposits are provided by both banks and Non-Banking Financial Companies (NBFCs) to customers. Generally, banks offer fixed deposits to customers who have an existing savings account. In some cases, banks also provide additional features like an added insurance cover for a specified amount for a fixed period while opening a fixed deposit account. But, you must remember that the interest rate provided by banks is lower than those provided by NBFCs. If you want to park your surplus funds in a fixed deposit with a higher interest rate, then you can opt for an NBFC fixed deposit.
Here, you must ensure that the financial company, which you are entrusting your funds with, has adequate creditworthiness. On Finserv MARKETS, you can select the Bajaj Finance Fixed Deposit, which has good ratings from leading analytical companies like CRISIL and ICRA. Bajaj Finance Fixed Deposits has the highest stability rating of FAAA/Stable by CRISIL and MAAA/stable by ICRA. In 2019, Bajaj Finance was assigned a long-term rating of ‘BBB-/Stable’ and a short-term rating of ‘A-3’ by S&P Global Ratings.
NBFCs have emerged as key players in India’s vast and rapidly transforming banking and finance sector. The financial companies not only provide diverse offerings in the form of best fixed deposit plans, but also provide a slew of convenience features. NBFCs have played an important role in bridging the gap left by traditional banks. Now you must understand the key differences between NBFCs and banks.
NBFCs cannot accept demand deposits
While banks accept demand deposits along with the facility of issuing bank-drawn cheques, NBFCs do not provide these facilities.
Different set of rules for both
While banks are incorporated under the Banking Companies Act, NBFCs are governed by the Company Act of 1956. Bank offered fixed deposits base their interest payouts on the basis of monetary policies of the Reserve Bank of India like the repo rate. On the other hand, NBFCs are not governed by the monetary policies of the apex bank.
While fixed deposits made with NBFCs are rated by rating agencies, the bank offered fixed deposits are not rated by an external credit rating agency.
Deposit insurance facility
While the Deposit Insurance and Credit Guarantee Corporation is bound to pay the insurance amount on a bank offered fixed deposit, no such facility is provided by NBFCs. This, however, does not mean that your invested amount is not safe with NBFCs. If you avail of a fixed deposit in a financial company, which had adequate creditworthiness, as reflected by good ratings, then you can rest assured about the safety of both the principal and interest amount.
While banks have the authority of issuing credit cards on the basis of eligibility of existing customers, NBFCs cannot issue credit cards.
Banks provide a lower rate of interest as compared to NBFCs. On average, traditional banks can provide you with a best fixed deposit plan which can have an interest rate ranging from 3% to up to 6.5%. But, NBFCs can provide you with the best fixed deposit plans with an interest rate of up to 8% or more. For instance, on Finserv Markets, new customers can avail an interest rate of 8.60% for cumulative fixed deposits in tenors ranging from 36 to 60 months, while existing customers can avail interest rates of up to 8.85%. Here, senior citizens can invest in tenures ranging from 12 months to 60 months with an interest rate of up to 8.95%.
While banks can provide you with fixed deposit plan ranging between one year and 10 years, the tenures offered by NBFCs are from 12 months to 60 months.
Both Banks and NBFCs provide fixed deposits to customers. But, the fixed deposits provided by NBFCs have an edge over traditional bank deposits as they offer a higher interest payout along with a host of added features. For example, on Finserv MARKETS, you can open a hassle-free online fixed deposit with minimal documentation. The fixed deposit policies are simple and transparent, and you receive detailed SMS and email communication starting from the opening request of the fixed deposit to its maturity. A scanned copy of all your documents is available online for easy access.
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