Commodity Analysis

Bajaj Finance: Attractive interest rates

Parvatha Vardhini C | Updated on September 09, 2019 Published on September 08, 2019

Investors not looking for regular income can consider the 36-month cumulative option

Fixed-income investors with an appetite for risk can consider parking a portion of their surplus in the fixed deposits of Bajaj Finance. The company offers both cumulative and non-cumulative options under its fixed deposit scheme.

The tenure ranges 12-60 months with interest rates from 7.72 per cent to 8.35 per cent. The offer is rated FAAA/Stable by CRISIL and MAAA (Stable) by ICRA denoting that the degree of safety regarding timely payment of interest and principal is very strong and that the credit risk is the lowest.

The minimum deposit amount is ₹25,000. The company offers 0.10 percentage points higher interest for Bajaj Group employees, Bajaj Finance customers and existing policyholders of Bajaj Allianz Life Insurance. Senior citizens get additional 0.35 percentage points.

Investors who are not looking for regular income can consider the 36-month cumulative option that offers 8.35 per cent returns. With the RBI easing repo rates by over one percentage point so far this year, deposit interest rates have been falling over the past few months.

Since interest rates are on a descent and are expected to be benign in the near to medium term, a three-year time-frame will enable investors the opportunity to lock into higher rates now. Besides, a three-year tenure is ideal to scout for better reinvestment opportunities if the rate cycle turns by the time the deposit matures and the interest rates begins to move up by then.

The 8.35 per cent offered by Bajaj Finance is higher than what some comparable NBFC deposits offer. AAA rated NBFCs such as LIC Housing Finance and HDFC offer less than 8 per cent for a three-year term.

The interest rates for three-year deposits in most private and public sector banks stand at 6.5-7.75 per cent at present.

For a tenure of 33 months, M&M Financial Services offers a slightly higher rate of 8.7 per cent.

But it is not an apple for an apple comparison for two reasons — one, the tenures are not the same, and two, the 8.7 per cent rate is offered only on deposits made online through the M&M Financial Services website.

Investors can fill up an online application form on the Bajaj Finance website or do an electronic transfer of the amount they wish to deposit.

The downloaded application form with a photo and other required documentation will be collected by a company representative. An instant online loan of up to ₹4 lakh is available against this deposit.

About the company

Bajaj Finance focusses on lending to consumer, rural, SME and commercial segments, with consumer loans constituting 39 per cent . Its assets under management were at ₹1,28,900 crore as of June 30. Net NPAs as of June 30 stood at a low 0.64 per cent, and capital adequacy at a robust 19.48 per cent.

Published on September 08, 2019
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