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Nilanjan Dey

Kolkata, March 21

Companies accepting deposits, already a dwindling community, are on the backfoot. Many of them, unwilling to increase interest rates, are faced with the situation where investors are not ready for renewals. Instead, some sections are moving away to areas that have lately turned attractive - deposits with banks and fixed maturity plans with mutual funds.

While comparison between fixed deposits and fixed maturity plans currently makes for a hot topic of discussion in investment circles, deposits with companies are losing their relative importance, say those tracking the latest trends.

The main factor that has led to the trend is the apparent reluctance of the companies to raise rates on deposits.

For many manufacturing companies, shorter-term rates (that is, for 12 months) are roughly 7.5-8 per cent. For three-year deposits, this is higher, with a number of corporates offering 8.5-9.5 per cent. However, financial services companies, especially those that command superior credit ratings, present a slightly different picture, intermediaries point out.

Minimum investment requirements vary greatly for companies accepting deposits.

As distribution outfit Bluechip Corporate Investment notes, many require Rs 25,000 to start with. Many of them pay interest on a quarterly basis. A typical case may be a Rs 25,000 deposit, offering 7 per cent, 7.5 per cent and 9 per cent respectively for 12 months, 24 months and 36 months.

In the financial services category, a normal case may be a Rs 10,000 deposit, carrying half-yearly interest payments, with 8.25 per cent, 8.25 per cent and 8.5 per cent, respectively for the three time periods. There are variations of course; Bluechip maintains that certain players - including a well-known housing finance institution - are now offering special rates for longer duration deposits.

BANKS MORE ATTRACTIVE

In contrast, banks have started offering higher rates, which are being promoted aggressively. These, they say, have rendered bank deposits an attractive proposition, especially when compared to other fixed-return options. The latter include schemes for senior citizens (including those that allow premature withdrawal) and savings bonds.

The other contrast is courtesy FMPs, which are essentially close-end debt schemes that aim at relatively riskaverse investors. Indicative returns, say sources, have been going up in recent times. With indicative returns higher than 10 per cent per annum, it makes sense for fixed-income seekers to invest in FMPs, says distribution firm SKP Securities.

Related Stories:
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More Stories on : Investments | Fixed Deposits | Mutual Funds

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