A bank is a financial intermediary that focuses on providing banking facilities to the public under established rules and guidelines. Banks are registered under the Banking Regulation Act of 1949.

A Non-Banking Financial Company (NBFC), on the other hand, is a company registered under the Companies Act and regulated by the RBI under a different framework. While NBFCs offer financial services such as loans and fixed deposits (subject to RBI regulations), they do not hold a full banking licence.

Fixed deposits in different financial institutions:

Inflation has been elevated in recent years, which can push real (inflation‑adjusted) returns on traditional FDs towards the negative zone, especially when nominal FD rates are low. If one considers the cumulative effects of inflation and monetary policy, the real rate of return (inflation-adjusted returns) will soon be on the negative side.

There are FDs with NBFCs that offer predictable and competitive returns that can help with a steady flow of income. An established NBFC with a proven record is the solution in the current economic scenario.

How to pick the right NBFC for a fixed deposit

• Experience: To pick an NBFC for an FD, one of the major factors to consider is the experience that the NBFC has in the market. A trusted NBFC with a longer tenure of existence will always be a better choice.
• Security: The most significant advantage while choosing an FD scheme is the reliable returns at maturity. This feature makes FD schemes the popular choice among the investor community. Credit ratings assigned by agencies such as ICRA, CRISIL, or India Ratings indicate the institution’s creditworthiness.
• Flexibility: Fixed deposits are accessible to everyone and should be flexible. The greater the flexibility of the FD schemes, the better the plan. A non-cumulative FD should have a monthly payout structure, and a cumulative FD should have a compounding function.
• Rate of return: While higher returns may be attractive, they should be evaluated alongside credit ratings and institutional stability. A balanced approach between return and stability is advisable.
• Ratings: When opting for NBFC FD schemes, ratings play a very crucial role. Rating agencies keep track of company performance and grade them, making it easier to assess their dependability.

To choose a better alternative, we should also consider NBFC cumulative fixed deposits and NBFC non-cumulative fixed deposit schemes.

Which NBFC is best for fixed deposits in 2021?

Instead of focusing on a specific year (such as 2021), it is important to evaluate institutions based on current ratings, tenure options, service quality, and regulatory standing.

Shriram Fixed Deposit offers competitive interest rates along with tenure flexibility.

Shriram Fixed Deposit is accredited with Crisil AA+/Watch Positive” by Crisil Ratings Limited, "[ICRA]AA+ (Stable)" by ICRA and "IND AA+/Stable" by India Ratings and Research, indicating a high degree of creditworthiness as assessed by rating agencies.

Shriram Fixed Deposit

Shriram Finance aims to provide care to clients, driven by transparency and detail-oriented service.

Shriram FD schemes:

Shriram Finance provides structured FD schemes with transparent features and online tools such as deposit calculators to help investors estimate maturity value.

Shriram Finance offers two types of FD schemes:

1.  Cumulative scheme:  If an individual aims to build a corpus in the longer run, a cumulative fixed deposit is a better investment option. Here the principle of compounding is applied, interest earned from the deposit is added to the original sum, and the customer gets additional interest. The interest earned here is not paid out during the investment tenure. At maturity, the cumulative interest and principal are paid to the customer.

2.  Non-cumulative scheme:  This scheme is suitable for a customer who wishes to add a regular flow of income to their existing system. Here the interest is paid to the customer at regular intervals depending on the chosen scheme particulars. Interest payment intervals are monthly, quarterly, half-yearly and yearly.

Shriram FD schemes are easily accessible to anyone. You can simply log on to the website and view different combinations to help you make a sound decision. Shriram Finance follows its mission and vision to the core. This is reflected in the way FD schemes are tailored, along with the prompt delivery of the FD contract.