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Senior citizens with surplus to invest can consider fixed deposits from Sundaram Finance. The company has revised its interest rates recently and deposits are currently open for subscription. These deposits are rated MAAA / Stable by ICRA. This rating implies that the company has the highest credit quality and the lowest credit risk.
The offer
Sundaram Finance is accepting deposits for 12, 18, 24 and 36 months. The amount required to be invested in each case is a minimum of Rs 10,000 and multiples of Rs 1,000 thereafter.
The rate of interest offered for senior citizens is 9.75 per cent for the 12- and 18-month deposits and 10 per cent for the 2- and 3-year deposits. Those who have not yet completed 60 years as on the date of deposit will get 50 basis points lower in each of these options.
Investors have the choice between cumulative and non-cumulative deposits. Under the former, interest earned will be compounded at quarterly rests and paid on maturity, along with the principal. For the non-cumulative option, interest will be paid out every quarter. For the 36-month deposit alone, investors can opt for a monthly payout of interest. But whatever be the time period, if you are not looking for regular income from the deposit, choose the cumulative option to maximise the interest payout.
long-term deposits
The short-term option of 12 and 18 months are not attractive for senior citizens. For one, some smaller private banks are offering the same or even better rates for these time periods. Karur Vysya Bank and Lakshmi Vilas Bank offer 9.75 per cent for senior citizens for a 1-2 year deposit. LVB in fact offers a higher 10 per cent for one year deposits.
Further, the options among banks may increase in the near-term. The Reserve Bank has brought in several measures to curb liquidity in the markets, thanks to the depreciation of the rupee against the dollar.
Rates for short-term deposits are therefore on the ascent. YES Bank, for example, has revised its one-year deposit rates for senior citizens to the same 9.75 per cent from August 1. Hence, if you have this time horizon in mind, you will be better off choosing banks over Sundaram Finance.
The 10 per cent offer for 24- and 36-month deposits is not matched by banks as of now. Among non-banking companies, the Aashray Deposit Plus Scheme of Dewan Housing Finance offers 10.5 per cent (senior citizens) for two- and three-year deposits after the recent revision of rates in June. Although this offer is rated FAAA by Brickworks, CARE has an AA+ rating, a notch below the rating of Sundaram Finance. Shriram Transport Finance is offering 10 and 11 per cent interest for two- and three-year deposits ( senior citizens) since April, but is again rated only MAA+. Hence, senior citizens with a two- or three-year perspective can park at least part of their surplus in the Sundaram Finance deposit scheme.
COMPANY DETAILS
Sundaram Finance is in the business of funding commercial vehicles and cars, with the former accounting for 55 per cent of its total loans. Despite a tough year for this industry, the company managed to grow its disbursements by 6 per cent in 2012-13.
The company’s gross and net non-performing assets were at a 1 per cent and 0.45 per cent during this period, after adoption of the more stringent asset classification norms by the company, ahead of regulatory mandation. Net interest margins improved by around 60 basis points in 2012-13, aided by lower cost of funds.
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