I am a 32-year old housewife and want to invest in NBFC FDs. Is it a good idea?

Q. I am a 32 year old housewife. My husband is a luxury car dealer in Gurugram. Our family invests in a variety of financial products offered by banks such as recurring deposits, sweep accounts and fixed deposits (FD). I recently came across advertisements from various companies offering fixed deposits at a higher rate than my bank does. Are these NBFC FDs safe and can these NBFCs usually offer a higher interest rate than banks offer? Please also describe the points that need to be checked before opening an NBFC FD.

Sarika Godara, Gurugram, Haryana

An NBFC is a company registered under the Companies Act 1956 or 2013 and engaged in the acquisition of (a) loans and advances or (b) government or local government issued shares/stocks/bonds/bonds/securities. authority or other marketable securities of a similar nature; or (c) leasing, leasing-purchase, insurance business, or (d) fraudulent business.

An NBFC can receive a deposit from the public if it has a license for it. The said license is provided by the Reserve Bank of India (RBI). All NBFCs must comply with various rules and regulations made specifically for them by the RBI.

NBFCs are primarily financial companies that offer financial services and products, such as fixed deposits, to consumers, particularly those out of reach of banks.

How do NBFC FDs differ from FDs offered by bank FDs?

Understanding the differences between bank FDs and NBFC FDs is crucial when deciding to invest in one or the other. Here are the two main distinctions:

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  • Depositors can access a deposit insurance option through DIGC (Deposit Insurance and Credit Guarantee Institution). In case of NBFC this option is not available.
  • Besides FD, banks offer overdrafts, savings accounts linked to fixed deposits, etc. It can offer a range of other banking services such as However, NBFCs are prohibited by law from providing any banking services to FD customers.

Should you choose a bank FD or NBFC FD?

Choosing the right financier is crucial if you want to grow your savings with a fixed deposit. Here is a comprehensive comparison of NBFC FD vs Bank FD to help you make the right choice:

Interest rate offered

NBFCs typically offer higher interest rates than the bank fixed deposit rate. This is because NBFCs are known for their “credit risks”. Both NBFCs and banks use money raised from the public through fixed deposits to lend money for their loan business.

However, banks find it much easier to raise funds than NBFCs, as they are larger in size and have access to money deposited by the public in savings accounts. NBFS is prohibited by law from raising funds through an on-demand savings account, therefore

Related risk

Bank FDs are generally perceived as much safer than NBFC FDs, especially after Union Budget 2020 announced an increased insurance coverage of Rs. 5 lakh for bank deposits. NBFCs’ FDs do not provide such coverage.

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However, typically both NBFCs and bank FDs receive credit ratings from credit rating agencies such as CRISIL and ICRA based on their creditworthiness. These credit ratings help individuals to determine the credit worthiness of these banks and NBFCs, likewise Cibil score helps Banks and NBFCs to determine the credit worthiness of Individuals. We have reconstructed the ICRA’s credit rating scale for the following readers to review:

AAA Vehicles with this rating are considered to have the highest degree of security in the timely fulfillment of financial obligations. Such instruments carry the lowest credit risk.

AAA Instruments with this rating are considered to have a high degree of confidence in the timely fulfillment of financial obligations. Such instruments carry very low credit risk.

A Vehicles with this rating are considered to have sufficient security to meet financial obligations on time. Such instruments carry low credit risk.

BBB Instruments with this rating are considered moderately secure in meeting financial obligations in a timely manner. Such instruments carry moderate credit risk.

BB Instruments with this rating are considered to carry a moderate default risk in terms of timely fulfillment of financial obligations.

B Instruments with this rating are considered to carry a high risk of default for the timely fulfillment of financial obligations.

C Instruments with this rating are considered to carry a very high risk of default for the timely fulfillment of financial obligations.

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D Instruments with this rating have defaulted or are expected to default soon.”

Package Products

Banks often combine multiple financial products; for example, a bank may allow a fixed deposit to be opened through its internet banking facility. Many banks offer certain credit cards in exchange for fixed deposits held with them. This package of services is offered by NBFCs to a lesser extent.


NBFCs are generally more agile than banks and more adaptable to customers’ needs. If convenience is an important factor in determining your FD choice, you should opt for FDs offered by NBFCs. With the end-to-end online deposit experiences provided by many NBFCs, you can increase your savings effortlessly. In addition, with just the push of a button, NBFCs allow you to get a loan against FD through a paperless process.


It is very important to consider your individual goals when organizing your savings. Make sure you do some careful study and choose a plan that meets your needs, whether you’re buying a bank FD or an NBFCs. If you are choosing an FD from an NBFC, make sure it has a good credit rating.

Coverage is a free direct investment fund investment platform.

Note: This story is for informational purposes only. For detailed solutions to your questions, please contact a financial advisor.


Tax savings fixed deposits cannot be opened for five years

First Released: December 24, 2022 at 11:15 am BIST


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