A host of Indian companies have come out with NRI fixed deposit schemes, offering safety and attractive returns up to 8.95% pa at a time interest are expected to head south.
These FDs offer flexible tenor options between 12 months and 36 months along with multi-deposit and easy auto-renewal facility. They guarantee safe and assured returns in addition to insulating the portfolio from market-related risks.
FD rates vary depending on investor type, tenor and payout frequency. While a new customer can earn up to 8.35% interest, an existing customer can earn a maximum of 8.45% and a senior citizen, above the age of 60 years, can earn up to 8.70%.
The rates reach a peak when the FD tenor is at least 36 months and interest payouts are at maturity only.
Not bank FDs
However, one investment adviser said corporate fixed deposits should not be confused with fixed deposits of banks. Most public sector banks like State Bank of India have cut interest rates on fixed deposits, which means the yield on maturity will decline for FD investors.
Interest rates on savings schemes like Public Provident Fund and National Savings Certificates have been lowered.
Jojo James, chief executive officer, Fosbury Wealth Managers, and partner of Tamim Chartered Accountants, said that safety of funds is the one a prudent investor should consider as most important while investing.
In the present uncertain market condition that has low and even negative returns, the offer of assured gains will be compelling.
But he cautions that investors should go for those issuers who have high and stable credit ratings from ICRA, CRISIL and preferably a BBB rating from S&P Global. These ratings indicate timely interest and principal payouts and the stability of any long-term investments.
FD as collateral
The NRI fixed deposits also offer the facility of loan against the deposits. An investor can pledge his FD as collateral and avail a loan while his investment continues to earn interest.
Investors, who are residing in the UAE and other countries that have signed double taxation avoidance agreement with India, can claim benefits of tax credit or exemption, thus protecting their earnings.
Most of the fixed deposits offer a range of value-added features such as periodic interest payouts, flexible tenor, managing account online, facility to invest in several deposits with a single cheque and auto-renewal facility.
An NRI can invest in FDs through a Non-Resident Ordinary (NRO) account only. If he has opened a savings account before moving abroad, he needs to convert it into a Non-Resident External (NRE) account or NRO account.
Property for safety
Another investment adviser said property is a viable and relatively safe long-term investment option as most other asset classes are quite volatile in nature.
It’s good time to invest in real estate as property prices have almost bottomed out. Further, following four successive rate cuts by the Reserve Bank of India, commercial banks have reduced home loan rates, thus aiding demand.
Real estate is becoming a viable, safe and attractive investment option for long-term investors.