Fixed On Returns

Do you wish the money lying in your savings account would build up faster than the minimal interest that it attracts would allow it to? Maybe, just maybe, a fixed deposit could be the way out neither too risky and better rates.

Where do you begin? Should you be guided by die-hard loyalty towards your bank and stick with it or should you venture into sampling what manufacturing companies and non-banking finance companies have to offer? Which is a better bet?

A look at the tables shows that there is not much of a difference in the rate of interest, especially between the private and foreign banks. While most of the public sector banks offer an interest of 6 to 10 per cent for the short term period of 30 days to one year and a maximum of 13 per cent for five- year tenures, the private and foreign banks start with 8-10 per cent for short-term and 12-14 or 14.5 for 1 to 5 years lock-in periods.

 

A good way to shortlist the parking lots would be to start with the minimum deposits asked for. If you have limited funds at that particular point, go for the public sector banks that take in amounts as little as Rs 1,000.

Private banks have a wider range starting with Vysya Bank which accepts Rs 1,000, HDFC and Times Banks with Rs 10,000 while IndusInd scorns anything that is less than Rs 25,000.

Foreign banks are often suitable for only those with ample funds. But you still have an ANZ at the lower end with a minimum deposit of Rs 5,000. If are cash-rich and dont mind declaring it, you can earn a percentage point more with Citibank where the asking sum is a hefty Rs 3 lakh.

The manufacturing companies are a different kettle of fish altogether. Their yields are higher, 15 per cent rate usually. The returns will, of course, depend on the choice of scheme and whether the interest is compounded monthly, half-yearly, quarterly or annually.

While most manufacturing companies are not required to be credit rated, an increasing number of these companies have started to voluntarily opt for it.

Do remember, that ratings are not a one-time score. Rating agencies keep updating their assessment so do likewise when you want to select a fixed deposit. For instance, Ballarpur Industries has been put down a notch, from triple to double rating - indicating that it is nevertheless still safe.

Most of the manufacturing companies offer quarterly income or cumulative schemes. Monthly schemes come with the catch of higher deposit amounts ranging from Rs 10,000 to Rs 1 lakh compared to the Rs 2,000 to Rs 10,000 required for other schemes.

But, undoubtedly, the golden goose roosts with the NBFCs, that offer anything from 15 to 18 per cent. Here, too, the ratings have been re-evaluated. What is important is the range of incentives you can take over and above these interest rates? Which means badgering your broker or opting for a company offering higher incentives. The safest companies may be offering the least incentive. Also, it may be prudent to opt for terms not over a year if safety is the motto.

(These interest rates and ratings were applicable upto mid-February, 1997. Some finance companies and banks, like HDFC , have decided to reduce their rates by a percentage or two since then.)