Bajaj Finance hikes rates on deposits, yet again

Bajaj Finance, a non-banking financial company (NBFC), has hiked interest rates on fixed deposits (FDs) across various tenures, with effect from 1 July.

This is the third deposit rate hike by Bajaj Finance since May. With this, rates on its FDs across different tenures are up by 30-45 basis from that announced in May. The hike will apply to deposits, both new and those being renewed.

Bajaj Finance’s deposits enjoy the highest credit rating of AAA/ Stable by CRISIL and AAA (Stable) by ICRA. Deposits with NBFCs are not covered under the Deposit Insurance and Credit Guarantee Corporation’s insurance cover of up to ₹5 lakh. However, a higher credit rating does offer some level of comfort.

What’s on offer

Bajaj Finance offers cumulative and non-cumulative FDs (the latter with monthly, quarterly, half-yearly and annual interest pay-outs) of the following tenures: 12-23 months, 24-35 months and 36-60 months. Apart from this, it also offers specific-tenure deposits such as 15-month, 18-month and 22-month deposits, that offer slightly higher rates than its similar-tenure deposits. For example, the 15-month cumulative FD offers 6.4%, versus 6.2% on the 12-23 months FD.

After the latest hike, among Bajaj Finance’s deposits, the 44-month cumulative and non-cumulative FD (with annual interest payout) offer the highest rate of 7.5%.

Senior citizens will be offered a higher rate of 7.75% on these deposits. They get an additional 0.25% interest rate on all Bajaj Finance deposits.

Another NBFC, Shriram Transport Finance (STFC), too, revised its deposits rates in May.

Rates offered by STFC on deposits of certain tenures are higher than those offered by Bajaj Finance (see table). For cumulative deposits, while interest is compounded annually in the case of Bajaj Finance, it is compounded monthly in case of STFC. This makes the effective rate of return on STFC’s deposits even higher. However, STFC’ FDs are rated AA+ (Stable) by ICRA and AA+/ Stable by India Ratings and Research, a notch lower than the rating for Bajaj Finance’s deposits.

Interest income from fixed deposits is taxed at your income tax slab rate. This makes them most suitable for only those in the lower tax brackets.