Why is Investing in an NBFC Fixed Deposit a Good Option

After the recent hike in the repo rate by the Reserve Bank of India, FD interest rates have increased quite significantly. Both traditional banking institutions and Non-banking Financial Corporations (NBFCs) have started offering highly attractive and competitive rates of interest. If you're a conservative investor or someone who is risk-averse, then investing in an FD is the best option for you right now. Not only can you get high returns, but you also get to enjoy lower investment risk.

Considering the current investment climate, investing in an NBFC's fixed deposit scheme seems to be the more sensible option. You get to enjoy plenty of advantages by opting for an NBFC instead of a more traditional bank. Wondering what they are? Read on to find out.

Advantages of Investing in NBFC Fixed Deposit Scheme

Opening an FD with an NBFC can be very lucrative, thanks to the various benefits that the scheme offers. Here's a quick overview of some of these benefits.

1. Attractive Interest Rates

Compared to traditional banking institutions, NBFCs tend to offer a much higher rate of interest on fixed deposits. Take a look at the PNB Housing Finance FD rates, for instance. You can get returns of up to 7.25% per annum. And if you're a senior citizen, you're eligible for an additional rate of interest of about 0.25% over the base rate too.

That said, there are other Non-banking Financial Companies like Bajaj Finance, offering rates of interest of up to 7.75% per annum. Thanks to such high interest rates, you can meet your financial goals faster, without taking on much of a risk.

2. Customisability

Apart from the attractive FD interest rates, one of the many advantages of investing in an NBFC fixed deposit scheme is that it is completely customisable. For instance, you can customise the tenure of the investment according to your financial goals and objectives.
Most NBFCs offer tenures starting from as low as 12 months to as high as 60 months. This gives you the flexibility you need to ensure that you meet your financial targets. That's not all. You can also receive the interest payouts periodically on a monthly, quarterly, semi-annual, or annual basis instead of receiving it upon maturity.

3. Premature Withdrawal Facility

Another major benefit that you get to enjoy by investing in an NBFC fixed deposit scheme is the ability to withdraw your investment prematurely. Let's say that a few months after you invest in an NBFC FD, you're in urgent need of funds. What do you do? You can simply choose to close the FD and use the funds to meet your emergency fund requirements.

However, here's something that you need to know. Most NBFCs usually have a lock-in period of three months. And only after the lock-in period are you allowed to withdraw your investment. So that's something that you should keep in mind if you're planning on prematurely withdrawing your FD.

4. Loan Against an FD

Continuing on from the previous point, what if you're in need of funds, but don't wish to liquidate your FD prematurely? Thankfully, there's a solution for that as well. Again, many NBFCs offer a facility called 'Loan Against FD', which you can avail to gain access to some emergency funds.

Opting for this facility, will get you a small loan with your fixed deposit held as a collateral for it. That said, there's usually a cap on the maximum amount of loan that you can avail using this facility. Generally, NBFCs offer anywhere from 60% to 80% of the value of the fixed deposit as a loan.

5. Safety and Security

When considering NBFC Fixed Deposit as a savings instrument, there's always a concern about the risk involved. This is because your deposits in NBFC FD are not insured. However, if you're looking to safeguard your deposit, it is advisable to invest in NBFCs with stellar safety and a strong financial background.

Another important consideration is the safety ratings for NBFC Fixed Deposit, which are awarded by credit rating agencies like CRISIL, CARE and ICRA.

The higher the credit rating, the lower the investment risk. The fixed deposit scheme of Bajaj Finance, one of the country's top NBFCs, carries FAAA/Stable rating from CRISIL and MAAA (Stable) from ICRA. This indicates a high level of safety and low risk.

Attractive FD interest rates aside, investing in the fixed deposit scheme of a Non-banking Financial Company can be very advantageous in other aspects too. So, what're you waiting for? Take advantage of the attractive interest rates on offer right now and invest in an FD with an NBFC right away. Thanks to a now paperless FD opening process, it shouldn't take more than a few minutes too.