NBFCs offer higher deposit rates than banks; invest after ascertaining risk

If you are comfortable with the rating, invest up to 10 per cent in a single company's paper

The crisis in Infrastructure Leasing & Financial Services (IL&FS) seems to have rattled non-banking financial companies (NBFCs), and many have started raising their deposit rates. For example, NBFCs, including LIC Housing Finance, Mahindra Finance, PNB Housing Finance, Shriram Transport Finance, Bajaj Finance and some others, have increased fixed-deposit rates in October and November.  

State Bank of India (SBI), the largest bank in the country, is offering an interest rate of 6.85 per cent for a 5-10-year fixed deposit (FD). In comparison, some NBFCs such as Shriram City Union Finance are offering 8.25-8.88 per cent on their 1-5-year FDs. 

  

Experts say