The ability to beat inflation and get returns more than inflation is called the real rate of return by economists. Until recently, CPI inflation in India was running at 9 per cent, though it has just about fallen to 5.52 per cent now for the month of Oct 2014.
To beat inflation and assuming that inflation rears its head again, you need to get returns in excess of 9 per cent. We take a look at deposits that can give you as much as 10 per cent with a yield that is way beyond that, giving you a comfortable margin to beat inflation.
Until Nov 30, Mahindra Finance was giving a fixed deposit interest of 10 per cent on a 36-month deposit. The company has now reduced the same to 9.75 per cent on 36 months with effect from December 1, 2014. If you invest at 9.75 per cent for three years, the effective yield works to about 10.73 per cent, helping you fight inflation. The Deposits have the highest rating and since they come from the Mahindra Group they can be considered as very safe deposits.
This Fixed Deposit comes from Kerala Transport Development Finance Corporation (KTDFC) making it a highly secure fixed deposit, since it is a government of Kerala owned entity. The fixed deposits attract an interest rate of 10 per cent on the one year, two year and three year deposits. For deposits over Rs 25 lakhs, the amount is 10.25 per cent. Senior citizens are entitled to an interest rate of 10.25 per cent. The deposits are guaranteed by the government of Kerala making them very secure and as good as government owned.
Shriram Transport Finance Fixed Deposits
The interest rates on the cumulative deposit is at 10.03 per cent with monthly rests. The effective yield works out to 11.65 per cent. This is pretty decent considering that the interest rates on bank deposits are much lower at around 9 per cent per annum.
Interest rates in the economy is falling and the Reserve Bank of India has clearly hinted that it may reduce interest rates early next year. This week Axis Bank and ICICI Bank dropped interest rates on fixed deposits and other banks may follow. It's therefore best to lock money into fixed deposits for a longer period for say at least three years. So, if interest rates fall you would have hedged against falling interest rates.