Fixed deposit (FD) is one of the safest and popular form of debt instrument. NBFC FDs generally offer higher interest but are slightly riskier than Bank FDs. Here are some points which can be considered while choosing FDs:
- Always pick AAA rated Bank or NBFC Fixed deposits. Bank FDs of small finance Banks are sometimes not AAA rates. Ratings can be found on rating like Crisil sites or Bank/NBFC site.
- Avoid keeping more than 10-20% of your asset in one NBFC FD and avoid keeping more than 50% of your assets in one Bank.
- Keep watching the credit ratings of the Bank or NBFC. There have been cases where FD ratings were dropped by agencies (e.g. Yes Bank, etc)
- Don’t keep more than 10-20% of your assets in AA rated or less fixed deposits.
- Check the early withdrawn policies and penalty of the deposit. It usually a good idea to have some flexibility to break FD early.
AAA rated some NBFC FD options
- Bajaj Finance Fixed deposit
- Shriram Transport Fixed deposits
AAA rated some Bank FD options
- Top 5 Banks in India (HDFC, SBI, Icici, Axis, Kotak) are safest but usually offer slightly low FD interest.
- Other Banks like IDFC, IndusInd, Au Small finance bank offer slightly higher interest rates and all AAA rates. So these can also be considered with some diversifications.