This AAA Rated Company Revises Fixed Deposit Rates: Should You Invest?

HDFC Ltd, India's leading housing finance company, has changed its fixed deposit interest rates. According to the official website of the company, the new rates are effective as of 7th January 2022. The company offers guaranteed and lucrative interest rates that are higher than those offered by large public and private banks. Apart from superior interest rates, HDFC Ltd fixed deposits are extremely safe since the company has obtained AAA ratings for its deposit scheme from two major credit rating agencies such as Credit Rating Information Services of India Ltd (CRISIL) and Investment Information and Credit Rating Agency of India Ltd (ICRA) for the past 27 years.

Resident Indians can invest in fixed deposit schemes of the company for a flexible maturity tenor ranging from 12 to 120 months to get a range of benefits such as higher interest rates, loan against deposits, online application, premature withdrawal, renewal or repayment of deposit, nomination facility, and different interest payout options such as Monthly Income Plan (MIP), Non-Cumulative: Quarterly Option, Non-Cumulative: Half-Yearly Option and Annual Income Plan (AIP).

HDFC Green & Sustainable Deposits

Green & Sustainable Deposits are a product offered by HDFC that promotes the United Nations' Sustainable Development Goals (SDGs). Green & Sustainable Deposits will aid HDFC's cooperation in programmes that effectively assist the United Nations' Sustainable Development Goals in order to preserve the health of our green environment. Under Green & Sustainable Deposits, the company allows three types of deposits such as special, premium and regular. On these deposits of less than Rs. 2 Cr the company has revised its interest rates effective as of 7th January 2022 and also allows senior citizens to earn additional rates of 0.25% across all tenors.

Special Deposits (Deposits upto Rs. 2 Crore)

Tenor	Monthly	Quarterly	Half-Yearly	Annual	Cumulative
33 Months	5.95%	6.00%	6.05%	6.15%	6.15%
66 Months	6.40%	6.45%	6.50%	6.60%	6.60%
99 Months	6.50%	6.55%	6.60%	6.70%	6.70%
Source: hdfc.com

Premium Deposits (Deposits upto Rs. 2 Crore)

Tenor	Monthly	Quarterly	Half-Yearly	Annual	Cumulative
18 Months	5.50%	5.55%	5.60%	5.70%	5.70%
22 Months	5.65%	5.70%	5.75%	5.85%	5.85%
30 Months	5.70%	5.75%	5.80%	5.90%	5.90%
44 Months	6.05%	6.10%	6.15%	6.25%	6.25%
Source: hdfc.com

Regular Deposits (Fixed & Variable Rates On Deposits upto Rs. 2 Cr)

Tenor	Monthly	Quarterly	Half-Yearly	Annual	Cumulative
24-35 Months	5.55%	5.60%	5.65%	5.75%	5.75%
36-59 Months	5.80%	5.85%	5.90%	6.00%	6.00%
60-83 Months	6.20%	6.25%	6.30%	6.40%	6.40%
84-120 Months	6.40%	6.45%	6.50%	6.60%	6.60%
Source: hdfc.com

HDFC Fixed Deposit Interest Rates

The company also offers regular fixed deposits for regular and senior citizens. The company has updated its interest rates on these deposits of less than Rs. 2 crores, effective January 7, 2022.

Special Deposits (Deposits upto Rs. 2 Crore)

Tenor	Monthly	Quarterly	Half-Yearly	Annual	Cumulative
33 Months	6.05%	6.10%	6.15%	6.25%	6.25%
66 Months	6.50%	6.55%	6.60%	6.70%	6.70%
99 Months	6.60%	6.65%	6.70%	6.80%	6.80%
Source: hdfc.com

Premium Deposits (Deposits upto Rs. 2 Crore)

Tenor	Monthly	Quarterly	Half-Yearly	Annual	Cumulative
15 Months	5.50%	5.55%	5.60%	-	5.70%
18 Months	5.60%	5.65%	5.70%	5.80%	5.80%
22 Months	5.75%	5.80%	5.85%	5.95%	5.95%
30 Months	5.80%	5.85%	5.90%	6.00%	6.00%
44 Months	6.15%	6.20%	6.25%	6.35%	6.35%
Source: hdfc.com

Regular Deposits (Fixed & Variable Rates On Deposits upto Rs. 2 Cr)

Tenor	Monthly	Quarterly	Half-Yearly	Annual	Cumulative
12-23 Months	5.25%	5.30%	5.35%	-	5.45%
24-35 Months	5.65%	5.70%	5.75%	5.85%	5.85%
36-59 Months	5.90%	5.95%	6.00%	6.10%	6.10%
60-83 Months	6.30%	6.35%	6.40%	6.50%	6.50%
84-120 Months	6.50%	6.55%	6.60%	6.70%	6.70%
Source: hdfc.com

Should You Invest?

For debt investors seeking higher interest rates than bank fixed deposits (FDs), company fixed deposits are an excellent choice. Although bank FDs have lower interest rates than company deposits, bank deposits are more secure because your deposits are insured up to Rs. 5 lakhs by the DICGC, whereas company deposits are for investors who are willing to take a risk because the DICGC does not cover company deposits and company deposits do not guarantee anything in the event of default.

Here investors should remember the thumb rule: higher risk, higher return. However, as a safety net for investors, I'd like to point out that company fixed deposits are rated by several rating organisations like CRISIL, ICRA, and CARE. CRISIL, for example, assigns a grade to company fixed deposits ranging from AAA to D.

Fixed deposits rated AAA, AA, or A is generally recommended for investment, according to CRISIL, with AAA indicating the highest level of safety, AA indicating a high level of safety, and A indicating adequate safety. In light of this, HDFC Ltd fixed deposits may be a smart choice for investors, since the instruments are rated AAA by both CRISIL and CARE, indicating the highest level of safety and minimal credit risk.

But does this mean that a company rated AAA or AA has no risk, and you may invest without evaluating the company's financial health? I'd like to draw attention to Dewan Housing Finance Corporation (DHFL), whose ratings were downgraded to D (default) by the rating agencies overnight in 2019.

So, while investing in company fixed deposits has the advantage of being rated, the problem is that the ratings may be switched to default promptly if the company goes bankrupt. When it comes to liquidity, yes you can also prematurely withdraw your deposits but only after the expiry of three months in the case of HDFC.

Investing in NBFC fixed deposits is advantageous because of higher interest rates than banks, as well as the risk associated. Investors who are willing to take a risk can invest in corporate fixed deposits, but only for the short-term or diversify their debt portfolio to increase their returns.

However, if investors want to invest for the long term in corporate fixed deposits, such as for 5 to 10 years, I would recommend going with equity since it will always provide you superior returns in the long run.