'Investors could look to lock in money into corporate FDs'

Mumbai: Investors could start locking their money into long-term fixed deposits with tenures of three to five years, said distributors. While deposit rates across the board have gone up by 50-75 basis points in the past nine months, the pace of rate increases could slow in the coming months, they said.

In the last fortnight, three companies HDFC, PNB Housing Finance and Shriram Transport Finance have raised rates by as much as 5-50 basis points. One basis point equals 0.01%.

After this rate hike, investors could earn as much as 8.25% from a Shriram Transport deposit, 7.05% from an HDFC deposit and 7.25% from a PNB Housing Finance deposit. This is the fourth time that industry leader HDFC has hiked rates since May 2022.

After the recent round of rate hikes, distributors said there is still room for some more rate increases on deposits but such hikes will be relatively marginal.

"Bulk of the rate hikes have happened. Investors can lock into longer tenure deposits with tenures of 3-5 years," said Anup Bhaiya, CEO, Money Honey Financial Services.

Distributors said that investors can earn 8-150 basis points more on their corporate deposits as compared to bank deposits. For example, a 3-5-year deposit with HDFC Bank will fetch 6.1%, while a 44-month deposit with Bajaj Finance pays 7.5%, and a 33-month deposit with HDFC pays 6.9%.

Financial planners said it is important that investors look for the safety of capital and not chase high returns in fixed deposits. Investors could diversify their deposits across four or five companies to lower risk. Bhaiya recommends HDFC, Bajaj Finance, ICICI Home Finance and Shriram Transport Finance, which are triple-A rated.

Many senior citizens and retail investors prefer corporate deposits over debt mutual funds for their simplicity and visibility of returns.

"Fixed deposits are a good bet for people whose income is not subject to tax or are in the marginal tax bracket. It is important to stick to companies with high ratings," said Abhay Mathure, a Mumbai-based distributor.

While company deposits returned investors 6-7% in the last year with certainty, many debt mutual funds returned as low as 2-3%.