From March 30, fixed deposits of 33-month duration will fetch 6.2% annualised returns. For 66-month deposits, the rate would be 6.6% and 6.65% for 99-month deposits. Senior citizens would get 25 basis points more. Distributors said this is the first time after October 2018 that HDFC Ltd has raised deposit rates.
“Bond yields too have moved up and overall interest rates are on an upward trajectory, which has led to some companies raising rates” says Anil Chopra, Group Director, Bajaj Capital. In February, Bajaj Finance, another top-rated lender had raised interest rates on fixed deposits by 40 basis points. Fixed deposits from Bajaj Finance with tenures of three to five years earn 7%.
Some companies have cut their deposit rates.
, which paid over 8% interest, has reduced deposit rates by 15-25 basis points. It will now pay 8.25% for a five-year deposit.
Distributors said in the pandemic, top-rated corporate deposits from strong groups rose as investor appetite for riskier fixed income instruments has been low. Defaults by
, IL&FS and Franklin Templeton shutting down six debt schemes have prompted many investors stick to simple fixed deposits. Many senior citizens use monthly interest options to meet their cash flows as these instruments give them predictable returns.
Financial planners believe investors whose income is not subject to tax or are in the marginal tax bracket could consider these deposits.
“After the hike in rates what you get from HDFC is 100-120 basis points higher than what that paid by banks deposits,” says Anup Bhaiya, Founder, Money Honey Financial Services. Currently State Bank of India, pays 5.4% for deposits of five to ten years while ICICI Bank pays 5.5% for the same tenure. Bhaiya said investors with a longer time frame could lock some money into HDFC to take advantage of the high rates.
Financial planners said investors must build a ladder of the fixed deposit portfolio spread across over 3-4 companies with different time maturities as this will give them cash flows. “Do not confine your investments to one company. It is best to spread your investments across 4-5 good quality AAA rated companies like HDFC Ltd, Bajaj Finance, LIC Housing, Mahindra Finance,” said Chopra.
