Bank FDs vs. NBFC FDs: Comparing Risks and Returns in 2024 (2024)

FAQs

Bank FDs vs. NBFC FDs: Comparing Risks and Returns in 2024? ›

Every individual who wants to invest ideally looks for options that offer higher returns along with the security of their funds. In the case of FD, NBFCs offer 1-2% higher interest rates than banks. Several top nationalised banks provide rates in the range of 5-6% p.a.

For tenures ranging from 36 to 60 months, the annual interest rate reaches 8.10%. The NBFC also offers higher interest rates on special period fixed deposits, such as 7.8% for an 18-month tenure, 7.90% for 22-month FDs, 8.10% for 33-month FDs, and 8.25% for 44-month FDs, effective from 3 April 2024.

A lot of banks are offering high interest rates of 7-9% p.a. range on fixed deposits of various tenures. The rates are expected to go down in the second half of 2024. Hence, this is a good time to allocate some money from the debt portfolio to FDs at current high rates.

Issuer: Bank FDs are issued by banks whereas Corporate FDs are issued by Non-Banking Finance Companies (NBFCs) or other such corporate entities. Interest Rates: Bank FDs offer slightly lower interest rates than Corporate FDs, making them less attractive to professional investors.

30-year mortgage rates are currently expected to fall to somewhere between 6.1% and 6.4% in 2024. Instead of waiting for rates to drop, homebuyers should consider buying now and refinancing later to avoid increased competition next year.

Fed chairman Jerome Powell has suggested that rates will eventually decline sometime in 2024. According to the Summary of Economic Projections, the Fed may implement at least three 25-basis point interest rate cuts in 2024—bringing the federal funds rate closer to 4.60%.

However, 2024 has come with new hope and there is a likelihood of an interest rate reduction estimated to be in the range of 0.5% to 1.25%. While existing home loan borrowers are likely to benefit from these rate cuts there are many other steps that you can take to gain more from falling interest rates in 2024.

The new rates came into effect on April 17, 2024. After the update, the bank offers the highest interest rates of up to 7.25% on savings accounts and up to 8% on fixed deposits for general citizens, while senior citizens enjoy a rate of 8.50%.

Is it safe to invest in NBFC FD? ›

Similar to Bank Fixed Deposits, NBFC Fixed Deposits allow investors to deposit a lump sum amount for a fixed tenure at a predetermined interest rate. These deposits are considered a safe and secure investment option, making them an attractive choice for risk-averse investors.

Benefits and risks of NBFC FD

Higher interest rates: NBFCs typically offer higher interest rates than banks. Flexibility: You can choose the tenure of your investment, from a few months to a few years. Convenience: You can open an NBFC FD online or at a branch.

The Investment Information and Credit Rating Agency (ICRA) evaluates the credit risk of all the NBFCs in India. You can confidently invest in Bajaj Finance Fixed Deposit as it has the highest credit ratings— CRISIL AAA/ STABLE and [ICRA]AAA(Stable).

Start your investment journey with a Shriram Fixed Deposit. With the trust of over 2.12 million customers, Shriram offers a high-security deposit. The Shriram FD has been rated "[ICRA]AA+ (Stable)" by ICRA and "IND AA+/Stable" by India Ratings and Research (Indicating a high degree of safety).

Are Shriram Finance FDs safe? Yes. The STFC FD is rated FAAA/Stable by CRISIL, and MAA+ by ICRA. These ratings suggest good credibility and reliability.

Mortgage rates may continue to rise in 2024. High inflation, a strong housing market, and policy changes by the Federal Reserve have all pushed rates higher in 2022 and 2023. However, if the U.S. does indeed enter a recession, mortgage rates could come down.

While it's difficult to predict how interest rates will change, in December 2023, the Fed predicted it would lower the federal funds rate to 4.6% by the end of 2024. Because its the rate banks charge each other to borrow money, the fed funds rate directly impacts the rate consumers pay.

The interest rate charged by NBFCs on personal loans are competitive and range between 10.99% p.a. to 36,00% p.a. You may generally avail a loan amount of up to Rs. 25 lakh or even more with processing fee ranging between 2% and 3% of the loan amount.

Therefore the NBFCs have the right to decide the rate of interest on the lending and recovery of money.