Scared of falling FD returns? Time to lock into AAA-rated companies

Fixed deposit holders are likely to look for alternate investment avenues after the fourth cut in deposit rates by the State Bank of India in this calendar year. Financial planners suggest investors could spread their deposits across a mix of AAA-rated company deposits, post office monthly income scheme (MIS) and government bonds, to make good the loss in interest income due to falling deposit rates.

“Depending on liquidity needs and risk appetite, an investor can spread his investments across a mix of AAArated company fixed deposits, GoI bonds and post office monthly income scheme,“ says Anup Bhaiya, MD, Money Honey Financial Services.

For example in AAArated deposits such as Bajaj Finance, Mahindra Finance and PNB Housing Finance an investor can earn 8.3-8.4 per cent from a threeyear deposit.

LIC Housing finance and ICICI Home Finance, both-AAA rated, pay investors 7.95-8 per cent for a three-year deposit. Senior citizens and retirees looking for monthly income could opt for the post office MIS which pays 7.6 per cent. Investors looking for absolute safety and no risk could invest in Government of India bonds that offer 7.75 per cent with a tenure of seven years with an option to receive half yearly interest payments. “The ability to earn 1-2 per cent higher by investing in alternative products with strong management and financials like company deposits will draw many bank deposit holders to such products,” said Rupesh Bhansali, head (distribution), GEPL Capital.

With the fourth rate cut by SBI, depositors earned 6.8 per cent on a three-year deposit in February 2019 will now earn only 6.25 per cent.