Pal Credit Joins Rate War, Hikes Fd Interest

PAL Credit is the second non banking finance company to hike deposit rates after Reserve Bank of India removed the cap on interest rates. Reliance Capital was the first to hike rates.

PAL credit's rates are higher by two percentage points, over Reliance capital's 16 per cent rate in two year fixed deposits. Pal Credit has pegged its deposit rates at 17.5 per cent for one year deposits, 18 per cent for two year deposits, 18.5 per cent for three year deposits and 19 per cent for four and five-year deposits.

Under the cumulative schemes, the simple annual yield for a 5 year deposit works out to 30.60 per cent.

The above interest rates are compounded on a quarterly basis with the result that the deposit amount gets doubled in a period of 46 months. The company has a net worth of Rs 35.15 crore as on March 31, 1996. The company's FD scheme is rated FAA by Credit Rating Information Services of India Ltd (Crisil). Compared with this, Reliance Capital Ltd is offering higher interest rates on longer periods of deposits. This is because the amounts raised are largely to be put into infrastructure projects which have longer maturity fund requirements.

The company is offering 15 per cent for one year deposits, 16 per cent for two years, 18 per cent for three years, 19 per cent for a four-year period and 20 per cent for five years. The annualised yield works out to 29.77 per cent at the end of five years.

While PAL, is the only other company to raise its interest rates on deposits, a large number of finance companies are in the process of firming up their rates.