Debt Instruments to go for: NCD or Fixed Deposits?

As an investor, we are on the lookout for risk-averse investments. This aligns rightly with this post as I am sharing some information that you might find helpful.

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Normally, Fixed Deposits and Small Saving Instruments from the government are preferred by retail investors owing to the security of capital and the assurance of returns.

Let us delve further into this

There are two instruments from the debt side that can be used to invest for returns while getting capital assurance are alternatives in comparison to Fixed Deposits (FDs) from banks:

1. NCDs (Non-Convertible Debentures) are issued by different organizations and
2. FDs issued by NBFC(Non-Banking Financial Company)

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Having said this, I will also share what is essential while making the selection:

1. Ratings: Ideally from AAA to AA+ by Rating Agency (lower rating, high interest, higher risk)
2. Coupon Interest (Interest Rate)
3. Secured: Collateral for the NCD (as it is a debt instrument)
4. Area of Financing that the money is being raised for (using the NCD money to lend to retail for loans(like housing, etc.) is better than the money being used for heavy infra)
5. Payback Period

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Current Options of NCDs in 2023:

• INDORE MUNICIPAL CORPORATION NCD FEB 2023
  • Interest Rate Range: 8.25%
  • Duration: 3 years to 9 years
  • Date of Opening: Ongoing (Ends in 4 days)
  • Payout: Half Yearly
  • Minimum Investment: INR 10000
  • Rating: AA+ ICRA
  • NCD is Secured
  • Purpose: Housing and Other Activities under the AMRUT Scheme of GoI

• MUTHOOT FINANCE LTD NCD FEB 2023
  • Interest Rate Range: 7.75% to 8.6%
  • Duration: 25 – 61 months
  • Date of Opening: Ongoing (Ends in 3 weeks)
  • Payout: Monthly | Annually | Cumulative
  • Minimum Investment: INR 10000
  • Rating: AA+ ICRA
  • NCD is Secured
  • Purpose: Personal, Business, Housing, Gold, Infra, Farm, Vehicle Loans

Alternative to NCDs – FDs Provided by NBFC(Non-Banking Financial Company and they have lower interest rates but are safer)

• Shriram Finance
  • Interest Rate Range: 7.06% (monthly payout) to 7.30%(yearly)
  • Duration: 1 year
  • Minimum Investment: INR 5000
  • Rating: AA+/Stable (ICRA)
  • Interest Rates are Higher for women and senior citizens
  • NCD is Secured
  • Purpose: Personal, Business, Housing, Gold, Infra, Farm, Vehicle Loans

• Bajaj Finance
  • Interest Rate Range: 6.93% (monthly payout) to 7.15%(yearly)
  • Duration: 1 year
  • Minimum Investment: INR 15000
  • Rating: CRISIL AAA/Stable
  • Interest Rates are Higher for senior citizens
  • NCD is Secured
  • Purpose: Retail Loans

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Also, if you are looking to invest, I can help you with the same

As I am empaneled distributor, I will assist you — end to end and you do not need to pay me anything!!