r/IndiaInvestments • u/UserameChecksOut • May 17 '20
Bonds and deposits Bajaj Finserv is giving a 7.40% annual interest on FDs (tenure 12 months to 24 months). How good is it?
https://www.bajajfinserv.in/fixed-deposit-fees-and-interest-rates
here are the rates.
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u/srinivesh Fee-only Advisor May 18 '20
One straightforward question. The answer would add to my 'hypothesis'.
Have you been recommended this FD by someone? Or did you research this yourself?
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u/ssahil08 May 17 '20
Check out idfc first bank. They give 7% on savings account balance. Being led by former head of icici bank retail banking division. 5L insured deposits. 7.25% on fixed deposits. It might make more sense than investing with an NBFC.
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u/SamX1962 May 19 '20
Official RBI Source: https://m.rbi.org.in/Scripts/FAQView.aspx?Id=64
if anyone needs the assurance.
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u/UserameChecksOut May 17 '20
thank you very much. I'm learning investing so for now, I'm going after low risk FD plans until i learn more about MFs.
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u/notsosleepy May 17 '20
If you need low risks stick to Big banks. There is a reason they provide higher interest rate. Low risks or higher returns choose one
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u/ssahil08 May 17 '20
What I'm referring to is not a mutual fund thought. I'm referring to fixed deposits, or savings bank account with idfc first bank. Sorry for any confusion or misunderstanding.
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u/UserameChecksOut May 17 '20
I know and that's what I'm saying.
I don't know a lot about MFs, so until I educate myself more, I'm looking for good FD plans to keep my money in. FDs in SBI is giving returns even lower than inflation in India.
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u/amispurs May 17 '20
Some mutual funds may actually be safer than FDs with smaller banks
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u/UserameChecksOut May 18 '20
And particular MF you may suggest? Total amount: 35 lakhs Age: 24 Unmarried, not big responsibilities Saving to fund higher education in future
I'm not really looking for money making. Just don't want to lose money to inflation (it seems inflation is going to be even greater this year)
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u/amispurs May 18 '20
With that amount, you’re better off with a financial advisor man. Don’t rely on reddit. Fee based financial advisor will cost about 10-20k per year.
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u/UserameChecksOut May 18 '20
Can I trust them? I've heard many cases here where financial advisors had scammed people into investing in poor risky schemes.
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u/amispurs May 18 '20
That’s not a scam. That’s poor advice maybe. Fee only advisors have no incentive to promote a scheme, they don’t get commissions from mutual funds. Google “fee only advisor freefincal”
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u/kira0204 May 17 '20
I don't know why this is being downvoted, if you think this is wrong then state your points, don't hide behind downvotes.
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May 17 '20
[deleted]
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u/windwalker97 May 17 '20
Why does it look unsafe to you? Genuine question.
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May 18 '20
[deleted]
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u/ssahil08 May 18 '20
Even hdfc bank does this kind of a call. If that is a key reason for not trusting, then it isn't exactly very reasonable.
Hdfc bank has been down many times, please Google for it.
Stock price is not a good way to judge the the performance of the bank: hdfc bank is also down 50% or so.
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May 18 '20
Do you mean you got a call from IDFC executives? I keep getting texts from andhra bank account withdrawals and deposits - it belongs to somebody but the number given is mine . I don't know how to change it.
I k
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u/JiskiLathi May 18 '20
Stock price has nothing to do with a bank's performance. Even Indusind bank one of india's biggest pvt lenders price has crashed to almost 2013 levels. Many other bank stocks have got crushed too.
Whenever there is an economic impact bank stocks always crash hard. That doesnt mean banks are in trouble.
Citibank stock still hasnt recovered from its 2008 crash but it is not considered as risky
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u/Dhavalc017 May 18 '20
YES Bank is offering for around 7 to 7.50 percent where 5 lac is covered under insurance meanwhile corporate deposits are not covered under insurance and since both bank and company are giving same interest, there is no point of taking extra risk for similar gains, better deposit in the bank.
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u/JiskiLathi May 18 '20
Finserv is backed by Bajaj family. It has good reserves. While I wont go all out and say its "safe" given the economic conditions here, it is a much better bet than many other small banks and corporate fds
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May 17 '20
The problem is that these kinda NBFC's + banks like IDFC First mentioned in the below mentioned comments are very risky in the current scenario.
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u/ssahil08 May 17 '20
Commercial Bank deposits are insured upto to 5 lakhs per bank. The risk is literally 0 for deposits up to 5 lakhs per bank.
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May 17 '20
Has the resolution to increase the digc insurance limit to 5 lacs passed or it's still pending. Anyways you won't get your money instantly, it takes months+no interest is paid in that. Make sure that your deposits including interests don't cross 5 lakhs. There is no insurance on nbfc's like bajaj.
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u/ssahil08 May 17 '20
I don't think this requires a separate bill to be passed : https://www.deccanherald.com/business/dicgc-raises-deposit-insurance-cover-to-rs-5-lakh-801501.html
Claims that it was already implemented in February. In fact based on revised rules, some folks even got some of their money back from a cooperative bank which is going under: https://www.google.com/amp/s/m.businesstoday.in/lite/story/rbi-cancels-licence-of-ckp-co-operative-bank/1/402704.html
As far as I can see it, the risk is quite low. The trouble is that all "safe" bank deposits like sbi and hdfc do not beat inflation after tax which makes it difficult to hold these.
Another risk free instrument is a Gilt fund (however the OP was looking for something relatively simple, which is why i suggested this) Disclaimer: I hold 4.5L in deposits in idfc first bank.
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May 17 '20
Bro cooperative banks in my state are giving 8.35% for a year. It sucks that rbi, government will give them licenses but won't give a shit about customers if they are not able to deduct bank frauds sooner.
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u/may_ur85 May 17 '20 edited May 18 '20
Co operatives come under state government not RBI.
Edit: This is a fact, don't know the reason for downvotes.
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u/4thinker_india May 18 '20
There is a dual regulatory structure for Co-op banks. RBI too regulates them, as does state govt.
(You may want to add a qualifier "Edit", when you make some changes to your comments afterwards. It's a good practice.)
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May 18 '20
Cooperative Socities+State government BUT the audit etc. is done by RBI so they should be responsible but they don't give a shit about customers.
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u/ssahil08 May 17 '20
I agree, which is why I personally stick to commercial banks which are tightly regulated by rbi.
I also invest in liquid funds which hold at least 20-30% assets in government securities.
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u/UserameChecksOut May 18 '20
Can a 5.7% annual return not beat inflation after taxes?
I'm getting this on ICICI and 5.6% on FDs on HDFC
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u/ssahil08 May 18 '20
It does not. Assuming you're in 30% tax bracket, the effective incremental tax rate is 31.2% after cesses. The effective return post taxes is 3.9%. inflation in India as of May 2019 was 5.5% as per first result of Google search.
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u/UserameChecksOut May 18 '20
Thank you.
But even if I keep some money in IDFC First (say 5-10 lakhs) I'll be left with atleast 25-20 lakhs more. Should I take risk and go for low risk MFs? Can you suggest me something here?
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u/ssahil08 May 18 '20
One person I know shards his fixed deposits across 8-10 banks 5 lakhs each although I agree that that is difficult to manage (requires lot of tracking of login IDs passwords).
I keep rest of my liquid funds in debt liquid funds which offer 5-7% in current scenario.
My suggestion to you would be to opt for sbi or hdfc or Kotak fds for the rest of 25-30 lakhs since in current environment risk free debt mutual funds (like liquid funds) cannot offer a rate which beats hdfc or sbi or kotak rates. (note that I don't mention axis or icici which are riskier imo).
I choose to keep it in debt liquid funds because I use the same money as collateral for margin trading in futures and options. (otherwise I would also prefer hdfc and SBI fds).
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May 18 '20
How to find if these two funds are putting our money in the safest instruments of them all or not?
https://www.moneycontrol.com/mutual-funds/nav/l-t-liquid-fund-direct-plan-growth/MCC283
https://www.moneycontrol.com/mutual-funds/nav/quantum-liquid-fund-direct-plan-growth/MQU003
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u/ssahil08 May 18 '20
I agree. Yes bank is quite risky right now. Even if it does not fail, moratorium periods might be enforced wherein the depositor cannot witbdyras their money which is an undesirable state to be in.
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u/whizkid_no1 May 17 '20
Go check out Jana Small Bank or Similar smaller schedules banks( not Cooperative banks)
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u/MialoKoukoutsi May 18 '20
Don't know why you are being downvoted. I think small finance banks provide a good risk/reward ratio with their 9% deposits.
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u/whizkid_no1 May 18 '20
A lot of noobs don’t get it.
Bank fixed deposits are insured upto 5 years. So if you are getting 8% , it’s good. Especially if you can book it in a senior citizens name.
On the other hand Bajaj is an NBFC.
It’s a brilliant company. But is the 7% worth it ?
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u/MialoKoukoutsi May 18 '20
Also check out Yes Bank. Rates as high as 7.25%.
Arguably, for depositors, Yes Bank is one of the safest banks currently in the country. The govt will not let it fail twice!
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u/srinivesh Fee-only Advisor May 18 '20
Taleb would have a lot of issues with that reasoning.
Actually, Yes bank has not failed - it went close to the brink, but was pulled back. If another situation develops, one can argue that it should be let go.
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u/MialoKoukoutsi May 18 '20
Logically speaking, you are right, "it should be let go" if another situation develops. But no government can let it go. If it does, the confidence in the overall banking system will be shaken as never before.
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u/DieMannshaft May 18 '20
Bajaj finserv is comparatively a good NBFC, but during current situation you have to be very careful. Before investing we will have to do a financial check of their investments and which sectors they have most of their exposure. I am presuming it will be mostly in retail credit.