Thursday, 4 December 2014

Bank Deposits Down- A Trend, or Lasting Reality?

In recent times, banks are reporting a steady decline in deposits from customers across the economic scale. This is obviously a worrying factor, not helped by the fact that many reputed Indian banks including State Bank of India (SBI), Punjab National Bank (PNB), Bank of India (BoI) etc. have, recently, slashed the interest rates across a wide range of fixed deposit maturities. Is this the start of a mass trend? Have the banks lost their charm as a safe and productive outlet for an individual’s hard earned money, via instruments like the fixed deposit?

Is this time to safely relegate the erstwhile superstar that was the fixed deposit as a relic from the days gone by?

Not so fast, dear investor. The warning bells and the doomsday predictions will have to wait a while longer.

Rising Cost of Living (Money is Short- Commitments Are Many)
With modernisation and all-round advancements, the cost of living has correspondingly hit the roof. The common Indian man now needs to stretch his hard earned rupee much farther than before. When expenditure eats up most of the income, savings turn into a luxury rather than a rule. In August 2014, bank deposits across India grew at an alarming rate of just 5.6%- the lowest in the preceding five years, signalling and providing ample proof for this hypothesis. This worries those in the banking trade because deposits from individuals account form a majority of such monetary inputs- 36% as compared to 34% deposited by businesses annually.
The solution- can the cost of living scale down in the coming times? Maybe Santa Claus could do something about it…

Shifting Priorities- A House, Car, and maybe World Peace!
For common households, the first priority when it comes to disposable cash is a roof over their heads- which translates into housing loans and mortgages. Next, the common man looks for other necessities in life, a car, education for the kids, implements for the house etc. This allots a very limited margin for sustainable and undisturbed bank deposits, a fact made difficult by the rapid urbanization of the Indian middle class. Money is short- and it serves a greater purpose when not locked in a bank. The fact that home loans, car loans are holding steady feeds to this idea.

It’s a Viral Epidemic- Impacting Other Deposit Instruments
The slowdown in bank deposits has had a natural escalation- other products in the bank’s kitty, including current accounts and savings accounts are feeling the pinch. These products are the bank’s primary and cheapest form of funding, that have risen at a mere 5.1% in August 2014. The concern arising from this is that as loan growth is a much higher prospect than the growth of its cheaper forms of funding, the banks might have to dip into their expensive forms of cash to power their loan growth. It’s like cigarette smoking- the end results are never good, cumulating in such scenarios as a slower lending growth.

Negative Real Returns on Deposits- Bad gets Worse!!
This year, inflation has maintained a steady height across the 12-month fixed deposit rate, resulting in among other things, cut-down on the real returns on deposits. Next year, the situation is expected to get worse, surpassing the 3.3% inflation rate set in August 2014. This will ensure that returns on deposits will not meet the expectations of the investor, forcing them to invest in other high-yielding formats including trusts, stock market etc. The situation looks grim for the bank deposit scenario, and all the banking analysts who are hoping for a ‘poof-and-the-problem-is-history’ solution.

Hence, while the bankers search for an answer to this nagging problem, the common folks are holding on tight to their monies and looking out for more productive results. Understandably, the one solution that could ease the worries at both ends could be the lowering cost of living, an option that only a progressive and people oriented budget can confirm upon. The wait, begins!!

Monday, 10 November 2014

Fund your loan with a loan against fixed deposit

At some point in time everyone needs cash and most of the times we avail a loan or sell our assets. Especially in times of urgent cash most of us do not realize that, we could still have that last bit of cash left in us, only if we looked for it.
Have you ever tried availing loan against your fixed deposit?
Yes, banks offer loan against your fixed deposit. The surprise just does not stop here, you also get a range of benefits compared to the traditional loans.



Cheaper interest rates
Loans against fixed deposits are way cheaper. In fact the interest rates are less than half of what you pay when compared to your personal loans. For loans against fixed deposits, the interest rate is mostly just a percent or 2 higher than the interest earned on your FD. For example, if your FD offers you 8% percent interest on maturity then you pay just 9 percent for the loan borrowed on your fixed deposit.

Pay only for the loan amount and the tenure of the loan
In simple words if you availed a loan amount of 9,000 against your fixed deposit of 10,000 and if you repay the amount in 10 days, then you pay the interest only for the ten days against a loan of 9,000 rupees. Therefore, interest is charged only on the amount borrowed and for the tenure of the borrowed amount.

Get up to 90% of sum assured
In most cases when we avail for a loan, we are always short changed. However in case of loans against fixed deposits there is a possibility of getting up to 90% of the loan amount simply because the loan amount is based on the value of your fixed deposit.
As always do not just go with flow, most importantly find the purpose of the loan. Go for loan against FD mostly in case of a temporary cash crunch and if you are sure you will get some liquidity in the near future.

No repayment charges
Unlike your home loan or personal loans, there are no charges in case you pay off your loan against fixed deposits earlier than the stipulated period. So in case you did get some extra cash or the extra liquidity you need not think twice before repaying your loan on the FD.

Instant Loan disbursement
No need to fill lengthy forms, go through elaborate procedures or worry about your CIBIL score. Loans against fixed deposits are easily available as the lender knows the maximum amount to be disbursed by looking at your fixed deposit amount and the tenure. However, going forward if you are not paying your loan on time, it will surely reflect on your credit score and might affect your future loan eligibility.

Processing fees is almost next to nothing
Almost every loan starts off with the dreaded processing fees. It is all fine once the loan is disbursed. If your loan is rejected or later you realized that the loan is not as per your terms and conditions then your processing fees in most cases is as good as gone. However, in case of loans against fixed deposits there is only some marginal fees and the banks might even waiver it off in case you are a regular customer.

Loan tenure is till the FD maturity date
You can actually fix the tenure of the loan amount based on your repayment capacity and in most cases you can choose the tenure for as long as the fixed deposit's maturity date. So in case you have gone for those long and steady fixed deposit plans, then you can avail a long tenure and also enjoy the low interest on loans against fixed deposits.

Take a moment of thought
However, with all the strings and bells attached, loan against fixed deposits must be taken with a pinch of salt. End of the day you are the best person who knows about your financial situation. Do not just go with the flow and opt for a loan. Loan against fixed deposit is best in cases where the liquidity crunch is for a short period of time and you are almost pretty much assured of getting cash in the near future.

In case your loan requirement is for a smaller amount, you can again opt for loans against fixed deposit while you can continue to earn interest on the balance amount of fixed deposit. However once you have availed a loan you cannot go for partial withdrawals of your fixed deposit or close the fixed deposit. You will have to continue your fixed deposit till the maturity date or go for the prepayment of the loan and there are no tax benefits as well.

Final Opinion

In case you need some fast cash without much fuss, then fixed deposits are one of the best sources for loans available. End of the day it is your own money and not only do you get interest on the balance amount but it does help to raise your own money.

Monday, 20 October 2014

Know all about Non-Bank Fixed Deposits

Bank fixed deposits is an all-time favorite investment vehicle for a large number of investors. While bank fixed deposits offer secured returns and other intrinsic advantages like option of availing loans and flexible tenure, banks are quite often the first ones to reduce interest rates on deposits in case of a recession or bad market economic scenario. Since most banks offer similar interest rates, the reduction of fixed deposits interest rates is usually uniform across all public and private banks. It is during such a scenario that investors look for alternate investment options that can offer similar advantages as bank fixed deposits.

Non bank fixed deposits or corporate fixed deposits are one such option that allows investors to invest their funds as deposits under various fixed deposit schemes. These non banking financial institutions have the complete authorization of Reserve Bank of India to seek investment from normal public and must not be compared to other crony ponzy schemes often operating in a recession market. Let us look at various aspects of investing in a Non-Bank Fixed Deposits or company fixed deposits a s they are commonly called.



Types of NBFC Fixed Deposit Schemes:  Investment in fixed deposit schemes of various non-banking financial companies have been authorized by RBI to have a term period between 12 months to 5 years. The rate of interest for such non banking financial companies FD schemes is higher than traditional bank fixed deposits but the investments are highly unsecured.

Non Banking Financial Companies have a two tier system for investors known as the cumulative fixed deposit scheme and non cumulative fixed deposit scheme. In the cumulative fixed deposit scheme, NBFCs offer interest at the end of the fixed deposit tenure. The interest keep son getting accumulated to the principal amount leading to higher returns. At the end of the investment tenure period, the investor gets principal amount along with the accumulated interest.

On the other hand, in case of a non cumulative fixed deposit, the interest earned by the investor is paid off on a regular periodic basis depending on the preference of the investor. Interests are usually paid out quarterly, half yearly or annually. Since in case of non cumulative fixed deposits the interest earned in not added to the principal invested amount, the returns are lower compared to non cumulative fixed deposits.

Fixed Deposits and Company Ratings: Before investing in fixed deposits in non banking financial companies, an investor must do a background check of the company in terms of its rating and performance. Various financial agencies like CRISIL and ICRA rate such non banking financial companies that accept investments from general public. The ratings are done in accordance to the new owned fund or NOF of the company along with RBI slabs and ceilings. The ratings of NBFCs give a perfect yardstick for investors to choose the right company for investment of their funds.

Interest Rates: Non banking financial companies offer higher interest rate for investments compared to bank fixed deposits. Reserve Bank of India has stipulated the maximum upper limit for interest rate at 12% for all investments made to various NBFC fixed deposit accounts. Considering the fact that maximum interest rate in today's economic scenario offered by banks ranges close to 9%, non banking financial companies offer interest rates between 9 to 12% making them an attractive investment option for a number of investors.

Premature Withdrawal Options: Investing in fixed deposits of non banking financial companies come with a lock in period of 3 months. After the expiry of the initial lock in period, the investor is free to withdraw funds prematurely from the deposit. Each NBFC can its own terms and conditions catering to penalties and calculation of interest accrued for premature withdrawals.


Other Advantages: While the investment may not be highly secured as bank fixed deposits, NBFCs offer a higher interest rate than bank fixed deposits. Like bank fixed deposits, nomination and premature withdrawal facility is available for company fixed deposits. The procedure to enter any company fixed deposit investment scheme is simple and non complicated allowing common investor to invest with ease.

Thursday, 9 October 2014

Why is it better to Invest in FDs than Mutual Funds?

From time immemorial, there have been some momentous questions that have invaded the minds of the rational, clear thinker- the chicken or the egg, democracy or dictatorship, the Beatles or Metallica? For the 21st century investor in you, one of the paramount questions is this- Where must I invest, in fixed deposits or mutual funds?

Both FD and mutual funds make logical arguments for their selection. Mutual funds are the new kids on the block, prospective high returns, seemingly progressive and definitely a better tax saving option as compared to FD. Fixed deposit on the other hand is considered a safer option, comes with a better guarantee in terms of the ready availability of funds and has that ‘traditional’ and ‘long-term’ vibe working for it. We are presenting below, a clear selection of reasons that put FD a notch above mutual funds as your ideal choice of investment. Of course, the final choice is always yours to make…

Think Long Term, or a year or two…
The lure of mutual funds lie in its short term success- your investment, a progressive market, good returns. However, fixed deposit ensures a reliable and steady FD interest rate that remains constant over a short term or long term duration. While this ensures security for your investment, it also sees to it that the chances of you losing money on your FD investment is a very tiny, miniscule percentage, against the constant unreliability of mutual funds.

No fees on investing…
Unlike mutual funds that require a minimum surcharge for the management of investment and distribution of funds, charged irrespective of actual returns gained, a fixed deposit doesn’t require any additional fees to get going. The FD is in place to only earn positive paybacks for the investor without demanding any additional monetary inputs to begin with.

More liquidity equates to ready cash…
True, most FD portfolios are conceived with an intent to invest money for a long duration, however, many banks allow you to withdraw your money prematurely, with a very small penalty (usually 1%). This ensures that you always have a source of ready, liquid cash that can be accessed immediately if situations thus demanded. This shouldn’t play havoc with the FD interest rate too as you will receive an interest rate in line with the duration your money was part of the FD portfolio. On the flipside, mutual funds fine a 1% exit load on prematurely terminated portfolios, while paying out interest on the prevalent Net Asset Value (NAV) that is squarely dependent on the ups and downs of the financial market.

Consistent return on FD investment
Investing in a fixed deposits come with an assurance that the FD interest rate that was promised to you at the time of the purchase of the fixed deposit will remain a constant factor through the duration of the policy. Such a promise isn’t a possibility with mutual funds. In the latter, the market decides the fate of your investment- it could be an impressive return in line with the market’s upswing, or you could lose money as the market hits the ground.


Bottom line- FD gives you safety, and an assurance of a fixed income on your investment. Fixed deposit is the choice of a safety oriented, smart and optimistic investor, who isn’t willing to cast away his/her hard earned money on the whims of an often volatilemarket

Wednesday, 17 September 2014

BANK OF BARODA - FIXED DEPOSIT INTEREST RATES 2014

Bank of Baroda (BOB), headquartered in Vadodara, Gujarat is one of the largest banks in India. This leading public-sector bank has a widespread network of over 4,460 branches and offers a wide range of products and services to meet the banking needs of its customers.

Amongst its products, BOB offers fixed deposits at varying tenors and at attractive interest rates. Below are the interest rates on the various Bank of Baroda fixed deposit interest schemes as at August 2014.



Less than Rs.1 crore

Period
Interest Rate
General Public: 7 Years 9 months & 02 days
9.05%
Senior Citizens: 7 Years 4 months & 05 days
(additional interest as applicable)
9.55%




Term Deposits & NRO Deposits - Interest Rates (p.a.)

Less Than Rs.1 crore

Period
Interest Rate
7 - 14 days
4.50%
15 - 45 days
4.50%
46 - days
6.50%
91 - 180 days
7.30%
181 - 270 days
7.75%
271 days - 1 yr.
8.25%
1 yr. - 6 yrs. 3 months
9.05%
6 years 3 months - 10 years
9.05%
1111 Days (Baroda Maha Utsav Deposit Scheme)
9.05%




Term Deposits & NRO Deposits - Interest Rates (p.a.)

Rs.1 crore to Rs.10 Crores


Period
Interest Rate
7 - 14 days
4.50%
15 - 45 Days
4.50%
46 - 90 days
6.50%
91 - 180 days
7.25%
181 - 270 days
7.75%
271 days - 1 year
8.50%
1 yr.
8.75%
1 yr. - 2 yrs.
8.75%
2 yrs. - 3 yrs.
8.75%
3 yrs. - 10 yrs.
8.50%

Tuesday, 2 September 2014

Latest FIXED DEPOSIT RATES - CENTRAL BANK OF INDIA

Central Bank of India is a public sector commercial bank. Headquartered in Mumbai, it has a large branch network of about 4,600 branches in about 27 states. It is among the oldest/largest commercial banks in India.
The Central Bank of India offers short and long term fixed deposits. Short- term fixed deposits are those term deposits where the term-to-maturity and interest rate are fixed for a short period of time i.e. less than one year. Long-term fixed deposits are those term deposits where the term-to-maturity and interest rate are fixed for a long period of time i.e. one year or more. The interest rates on fixed deposits are revised over time in accordance to market changes and bank requirements.
Fixed deposits are gaining ground as an investment avenue in 2014 given the government's positive outlook on controlling inflation. Lower inflation makes fixed return products like fixed deposits more attractive as the returns are guaranteed and not diminished by inflation.
The Central Bank of India's fixed deposit rates for 2014 are given below. It indicates both short-term and long-term fixed deposit rates in Central Bank of India.
Table 1 shows the rates that were existing and also the revised rates for fixed deposits that are less than Rs. 1 crore in value and those that range from Rs. 1 crore to Rs. 10 crore. Table 2 shows the existing and revised rates for aggregate bulk deposits for Rs.10 crore and above. (Footnotes appended for additional information).
Table 1
Domestic Term Deposits
Maturity Period
Rates for Deposits less than Rs.1 Crore
Rates For Deposits 1 Cr to Rs.10 Cr (Single Deposit)
Existing rates
Revised rates
Existing rates
Revised rates
02.04.14
17.06.14
03.02.14
17.06.14
7 -14 days
6.50
6.50
6.00
6.25
15 – 30 days
6.50
7.00
7.00
7.00
31 -45 days
6.50
7.00
7.00
7.00
46 – 59 days
7.50
7.50
7.25
7.25
60 – 90 days
7.50
7.50
7.75
7.75
91 – 179 days
8.20
8.20
8.00
8.00
180 – 270 days
8.75
8.75
8.50
8.50
271 – 364 days
8.75
8.75
8.50
8.50
1 yr to less than 2 yrs
9.00
9.00
9.00
9.00
2 yr to less than 3 years
9.05
9.05
8.75
8.75
3 yr to less than 5 years
9.05
9.05
8.75
8.75
5 years & above
8.75
8.75
8.75
8.75
555 days
9.05
9.05
NA
NA
777 days
9.15
9.15
NA
NA
Cent Double
8.75
8.75
NA
NA


Table 2
Aggregate bulk deposit above Rs.10 crore with effect from 07.07.2014:-
Period
Existing Rates (%)
Revised Rate (%)
7-14 days
6.00
6.00
15-30 days
7.00
7.00
31-45 days
8.25
8.25
46-59 days
8.50
8.25
60-90 days
8.60
8.25
91-179 days
8.60
8.50
180-270 days
8.85
8.85
271-364 days
8.85
8.85
12 months to 13 months
9.10
9.10
Prior approval of Treasury Central Office must be taken before accepting deposit of Rs.25 crore and above.
These interest rates are not applicable for Inter-Bank Deposits.

Senior citizen rates:
Senior citizens are given an additional 0.50% p.a. on the rates shown above. Senior citizen rates are considered for depositors above 60 yrs.
Penalty on premature withdrawals:
(As of 27.04.2013)
·         upto Rs. 5 lakhs - no penalty
·         above Rs.5 lakhs - 1%
·         renewal of the deposit for a longer term than the original period left after premature withdrawal - no penalty
Revised rates:
Deposit renewal and all new deposits will be as per the revised rates of interest on the term deposits as mentioned in the tables above.

Fixed Deposit Schemes at Central Bank of India
The fixed deposit rates in Central Bank of India for the various FD schemes on offer by the bank are given below:
1. Cent Benefit Deposit:  8.25% (No additional rate for seniors/staff)
2. Cent Millionaire:  8.75%
3. Cent Lakhpati:  8.75% - 9.05% (Additional rate for seniors/staff as per standards)
 4. CENT Swa-ShaktiI Flexi RDS:  As per prevailing term deposit rates (+ 0.5% for seniors/staff)   
 5. Cent Double Deposit Scheme:  8.75%
 6. Cent Super Plus term deposit:  9.30% (+.5% for seniors/+1% for staff)
 7.  CENT Uttam Scheme:  As per prevailing term deposit rates
 8.  Monthly Interest Deposit Receipt (MIDR):  As per prevailing term deposit rates (Monthly interest)
9. CENT Tax Saving Deposit:  As per prevailing term deposit rates for 5 yrs (upto Rs.15 lakhs)
10. Senior Citizen Deposit Scheme:  As per prevailing term deposit rates + 0.50% for seniors
11. Money Multiplier Deposit Certificate (MMDC):  As per prevailing term deposit rates (interest is added onto the principal for a higher effective interest rate)
12. Quarterly Interest Deposit Receipt (QIDR):  As per prevailing term deposit rates (Quarterly interest)
13. Central‘s Flexi Yield Deposit Scheme:  As per prevailing term deposit rates (Can avail a higher floating rate of interest)
Apart from the visiting banks or its website, Central Bank of India Fixed Deposit rates for 2014 can also be found online on financial sites.
BankBazaar.com is one such site that provides information not only on the fixed deposit rates in Central Bank of India but also lets you calculate the maturity values of the deposits by using a deposit rate calculator. Using this, the maturity value of the fixed deposit is returned on inputting the deposit amount for a particular tenure at a particular rate. You can also then apply for the product that suits you the best. 
Fixed deposit rates are different across banks because there are many factors that affect the rates set by each bank. Some key factors are: liquidity requirements, change in RBI's policy, profitability and also to build customer base and compete. These are some of the reasons why other banks may offer fixed deposits at more attractive rates but the features of the products have to be compared to best suit one's investing requirements.
The information provided above is as per information released by the bank and is subject to change. All information must be read in conjunction with the additional features, terms and conditions relating to the said products as outlined by the bank.