This government company offers up to 8% interest on FD: should you invest?


Tamil Nadu Transport Development Finance Corporation Ltd

Tamil Nadu Transport Development Finance Corporation Limited (TTDFC) is a non-bank finance company 100% owned by the government of Tamil Nadu. This state-owned company offers two types of deposit systems that are attractive to investors, such as the Periodic Interest Payment System (PIPS) and the Money Multiplication System (MMS). Interest is paid monthly, quarterly or annually under the PIPS, and the minimum approved deposit amount is Rs.50,000 / -. Alternatively, under the Money Multiplier Scheme (MMS), interest is compounded quarterly at the going rate and the minimum amount of money that can be deposited is Rs.50,000.

The TTDFC website is straightforward and easy for investors to navigate. All transactions, from opening a deposit account to withdrawing funds, are done electronically. TTDFC term deposit offers multiple advantages such as loan facility is available up to 75% of deposit amount, appointment facilities are available subject to RBI provisions, renewal of deposits, option to opening of main / joint account, repayment of deposits at maturity, option of premature withdrawal and much more.

Premature withdrawal

Premature withdrawal

After three months after the deposit, no premature withdrawals are allowed. Early withdrawals made after three months but before the end of the six month period will not be charged interest. Premature withdrawals after 6 months will be charged 2% interest less than the rate for a 12 month deposit. In the event of a premature withdrawal after 12 months, interest will be paid at a rate of 1% less than the rate on the due date. The deposit amount will be prepaid to the surviving depositor in the event of the death of the primary account holder. If the deposit is requested to be closed prematurely, depositors must provide at least 1 week’s notice, in accordance with company terms and conditions policy.

TTDFC FD interest rate

TTDFC FD interest rate

As of 01/18/2021, the interest rates on the Tamil Nadu Transport Development Finance Corporation Limited Term Deposit Systems are in effect. Below are the most recent interest rates on the company’s periodic interest payment system and money multiplier system.

Diagram – I PERIODIC INTEREST PAYMENT SCHEME

Others In % In % In % Old person In % In %
Period Monthly Quarterly Annually Monthly (%) Quarterly (%) Annually (%)
24 7.25% 7.50%
36.48 7.75% 7.75% 7.98% 8.25% 8.25% 8.51%
60 8.00% 8.00% 8.24% 8.50% 8.50% 8.77%
Source: https://www.tdfc.in

Money Multiplier System (MMS)

Others Old person
Period (Month) Base rate PA (%) Effective efficiency PA (%) Basic rate PA (%) Effective efficiency PA (%)
12 7 7.19 7.25 7.45
24 7.25 7.73 7.5 8.01
36 7.75 8.63 8.25 9.25
48 7.75 8.99 8.25 9.66
60 8 9.72 8.5 10.46
Source: https://www.tdfc.in

Should we invest?

As the Transport Development Finance Corporation Limited (TTDFC) is wholly owned by the government of Tamil Nadu, the risk of your deposit is thus minimized. And aside from deposit security, the company also promises an 8% long-term interest rate and even a very good short-term 7% rate that matches a 12-month maturity.

In the current scenario where leading banks such as SBI, Axis Bank, HDFC Bank, ICICI Bank offer an interest rate of around 5.30% to 5.40%, invest in the term deposit system of TTDFC can be a smart decision. The company’s interest rates are now second to none with those of other banks, even small finance banks. TTDFC’s short and long term deposit interest rates are very attractive, but here we suggest investors to invest short term to counter the interest rate risk on their deposit.

The reason for my opinion is that right now all the big banks are offering low interest rates because of the record RBI key rates. And if the economy goes up in the near future and interest rates rise, you won’t benefit from higher interest rates because you had blocked your deposit at the contracted rates. By investing for the short term, you will avoid not only the interest risk, but also the interest penalties on premature withdrawal of long-term deposits.

Besides this risk, investors should also keep an eye out for rising inflation which may give them returns below the rate of inflation if they are in the 30% tax bracket. So, to get higher returns from your FDs at TTDFC, it is best to invest short term, and if you are investing long term, diversification between secured debt instruments or equity funds is a must to beat. inflation, resulting in risk-adjusted returns.


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