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3 risk-free debt instruments with over 8% inflation-beating returns in 2022

Although banks have begun to raise interest rates, it is still difficult to generate inflation-beating returns against the present scenario. With this in mind, we have selected four risk-free debt investments that may provide you with stable and inflation-beating returns of more than 8%.Premium
Although banks have begun to raise interest rates, it is still difficult to generate inflation-beating returns against the present scenario. With this in mind, we have selected four risk-free debt investments that may provide you with stable and inflation-beating returns of more than 8%.

Generally, whenever the equity market experiences volatility and requires time to correct underlying prices, debt investments gain popularity.

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Generally, whenever the equity market experiences volatility and requires time to correct underlying prices, debt instruments gain popularity. In a turbulent equity market, playing it safe by diversifying your portfolio with risk-free debt instruments reduces the risk of potential profitability. In order to keep Consumer Price Index (CPI) inflation under control, which reached an 8-year high of 7.79% in April, the central bank is projected to announce another key rate rise in June which will result in interest rates going up further. Although banks have begun to raise interest rates, it is still difficult to generate inflation-beating returns against the present scenario. With this in mind, we have selected four risk-free debt investments that may provide you with stable and inflation-beating returns of more than 8%.

Shriram Transport Finance Recurring Deposit (RD)

Shriram Transport Finance Company (STFC) offers a recurring deposit (RD) with up to 8.50 per cent return for debt investors looking for inflation-beating returns. In response to the question "Is it safe to invest in Shriram Transport Finance Recurring Deposits?" investors should be aware that STFC RD has been rated "FAAA/Stable" by CRISIL, indicating the highest level of deposit safety, and "MAA+with Stable Outlook" by ICRA which gives a clear view of credit level. STFC is offering an interest rate of 7.03 per cent on recurring deposits maturing in 12 months, 7.12 per cent on RDs maturing in 24 months, 8.18 per cent on deposits maturing in 36 months, 8.34 per cent on deposits maturing in 48 months, and 8.50 per cent on deposits maturing in 60 months, effective August 1, 2021. This deposit plan is open to both resident individuals and HUFs with a minimum deposit of 500 per installment.

Tamil Nadu Power Finance and Infrastructure Development Corporation (TNPFC) FD

Tamil Nadu Power Finance and Infrastructure Development Corporation (TNPFC) is a government enterprise in Tamil Nadu, hence a risk debate is not necessary at this point. This government-backed organisation provides a fixed deposit scheme with both cumulative and non-cumulative options. 

The non-cumulative fixed deposit has a maturity period of 2 to 5 years, and as the name implies, the interest rate, which ranges from 7.25 per cent to 8 per cent, is paid monthly, quarterly, or yearly, and the deposit amount is credited to the investor at maturity. Non-cumulative fixed deposits maturing in 24 months will gain an interest rate of 7.25 per cent, deposits maturing in 36 months will receive an interest rate of 7.75 per cent, deposits maturing in 48 months will accept an interest rate of 7.75 per cent, and deposits maturing in 60 months will fetch an interest rate of 8 per cent, which is an inflation-beating return for regular customers. 

Senior citizens will receive an additional rate of 0.5 per cent. The cumulative FD has a maturity period of 1 to 5 years with an interest rate of 7.25 per cent to 8%. The interest would be compounded quarterly and paid on maturity, as the name implies. Deposits maturing in 12 months will earn a 7% interest rate, deposits maturing in 24 months will generate a 7.25 per cent interest rate, deposits maturing in 36 to 48 months will win a 7.75 per cent interest rate, deposits maturing in 60 months will obtain an 8% interest rate, and senior citizens will earn an additional 0.50 per cent interest rate on their deposits.

Tamil Nadu Transport Development Finance Corporation Ltd (TDFC) FD

Tamil Nadu Transport Development Finance Corporation Ltd (TDFC) is a wholly-owned subsidiary of the Government of Tamil Nadu that provides a fixed deposit scheme for debt investors with two options: Period Interest Payment Scheme (PIPS) and Money Multiplier Scheme (MMS) (MMS). The minimum deposit amount permissible under MMS is Rs.50000, and interest is compounded quarterly at the applicable rate of interest and paid on maturity along with the principal amount. 

The MMS plan has deposit terms ranging from 12 to 60 months, with the company offering a standard rate of 7 per cent and 7.25 per cent for senior citizens on deposits maturing in 12 months. On MMS FD schemes maturing in 24 months, TDFC provides a regular rate of 7.25 per cent and 7.50 per cent to senior citizens; on MMS FD schemes maturing in 36 to 48 months, TDFC provides a regular rate of 7.75 per cent and 8.25 per cent to senior individuals. TDFC provides an inflation-beating regular rate of 8.00 per cent and 8.50 per cent to senior citizens on MMS FD schemes maturing in 60 months. 

The minimum deposit allowed under the PIPS scheme is Rs.50,000/-, and interest is paid monthly, quarterly, or yearly. Regular customers will get a monthly interest rate of 7.75 per cent on PIPS FD maturing in 36 to 48 months and an interest rate of 8.00 per cent on PIPS FD maturing in 60 months. Under the PIPS scheme, regular customers will get a quarterly interest rate of 7.25 per cent on deposits of 24 months, 7.75 per cent on deposits of 36 to 48 months, and 8.00 per cent on deposits of 60 months. Under the PIPS plan, regular customers will get an annual rate of 7.98 per cent on deposits of 36 to 48 months, and an annual rate of 8.24 per cent on deposits of 60 months. 

Senior citizens will get a monthly interest rate of 8.25 per cent on deposits of 36 to 48 months and an interest rate of 8.50 per cent on deposits of 60 months. They will get a quarterly rate of 7.50 per cent on 24-month deposits, 8.25 per cent on 36-48-month deposits, and an 8.50 per cent quarterly rate on 60-month deposits. Under the PIPS Scheme, senior residents will get an annual rate of 8.51 per cent on deposits of 36 to 48 months and an annual rate of 8.77 per cent on deposits of 60 months.

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