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Deposit rates have been heading south in the last one year. From around 9-9.25 per cent a year ago, banks are now offering 8.5-8.75 per cent on their fixed deposits across tenures. The RBI began easing its policy rates in January and further rate cuts will only nudge banks to trim their deposit rates further over the course of the year.
Given the falling interest rate cycle, investors looking for higher rates and willing to diversify their fixed deposit portfolio can consider corporate deposits.
The fixed deposit scheme offered by Shriram Transport Finance, has now been upgraded by Crisil from FAA positive to FAAA stable. The rating is the highest grade assigned to fixed deposits, and indicates highest degree of safety regarding timely payment of interest and principal.
For periods of three and five years, the interest rates are 9.5 per cent.
Across time periods, the rates compare favourably with other non-banking finance companies’ deposits with similar ratings.
Opt for 3 yearsInvestors not looking at regular cash flows from interest payouts can choose the cumulative option, as it will fetch higher returns due to compounding.
Since rates on both the three- and five-year options are similar, investors can opt for the three-year tenure.
This is long enough to help tide over the current downturn in the interest-rate cycle.
The rate offered by Shriram Transport is better than bank deposit rates as well as similar-rated NBFC deposits.
The best rate offered by banks in the three-year bucket is 8.75 per cent. Among similar-rated NBFCs, Dewan Housing Finance offers 9.5 per cent and Bajaj Finance 9.25 per cent.
About the companyShriram Transport Finance is a pioneer in the pre-owned CV (commercial vehicle) segment.
Pre-owned assets under management constituted 91 per cent of the company’s overall assets as on March 2015.
The company’s gross non-performing assets stood at 3.79 per cent as on March 2015.
A move towards the 150-day NPA classification norm by March 2016 (from 180-day) may lead to volatility in earnings. However, the company has a healthy provision cover (80 per cent).
Crisil’s rating upgrade reflects improved outlook for the CV industry and the company.
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