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This “FAAA/Stable” Rated RD Is Offering 8.50% Returns: Should You Invest?

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Shriram Transport Finance Company Recurring Deposit (RD) is a good option for short-term financial objectives since the company's recurring deposit scheme is rated "FAAA/Stable" by CRISIL and "MAA+/ with Stable Outlook" by ICRA, indicating the deposit's excellent credit performance and safety. This company's recurring deposit scheme is now offering an interest rate of up to 8.50% which is something that is incomparable with any other recurring deposits in the market, but the matter of concern is should you invest to seek the same returns, let's find out.

 

Deposit tenure and eligibility

Deposit tenure and eligibility

Both Indian resident individuals and Hindu Undivided Family (HUF) can deposit for a maturity period of 12 months, 24 months, 36 months, 48 months, 60 months. For recurring deposits maturing in 12 months, Shriram Transport Finance Company will offer you an interest rate of 7.03%, deposits maturing in 24 months will fetch an interest rate of 7.12%, for deposits maturing in 36 months will fetch an interest rate of 8.18%, for deposits maturing in 48 months will provide an interest rate of 8.34% and the company will offer you an interest rate of 8.50% for deposits maturing in 60 months. From the deposit date until March 31st, the aforementioned relevant interest rates will be calculated on each monthly payment amount. These rates are applicable for a recurring deposit of a minimum amount of Rs 500.

Shriram Transport Finance Company Recurring Deposit Interest Rates
 

Shriram Transport Finance Company Recurring Deposit Interest Rates

Shriram Transport Finance Company's recurring deposit interest rates are as follows, effective August 1, 2021.

Period (months)Rate % (p.a at monthly rests)Maturity value for a monthly installment of Rs 500
127.036,230
247.1212,930
368.1820,460
488.3428,565
608.5037,500
Source: stfc.in

Premature withdrawal

Premature withdrawal

Shriram Transport Finance Company also allows premature withdrawal on recurring deposits. Premature interest payments are as follows.

Up to 3 months from the date of RD (Lock-in-period)No repayment (Not applicable in case of premature repayment in the event of death of the depositor)
After 3 months to less than 6 monthsNo interest
After 6 months but before the date of maturityThe interest payable shall be 2% lower than the interest applicable, if no rate has been specified for that period then 3% lower than the minimum rate at which RDs are accepted will be applied

Should you invest?

Should you invest?

Recurring deposits are a popular investment choice for salaried persons with a low-risk tolerance who are willing to contribute to their deposit on a regular basis in consideration for a predetermined rate of interest. While we're on the subject of recurring deposits, they're a good choice for both short- and long-term financial goals, and unlike debt instruments, the returns on Corporate RD aren't affected by market fluctuations.

However, while the Shriram Transport Finance Company Recurring Deposit has a high rating, such approaches assist to mitigate risk but are not purely risk-free. If the company's monetary health capacity declines, the RD may be subject to default risk, resulting in the loss of interest and perhaps the principal amount. As a result, investors with a high-risk appetite should look for Corporate RDs rated "AAA" or above to reduce the chance of collapse.

Those who do not want to invest in corporate recurring deposits because of the risk can invest in Post Office Recurring Deposits with an interest rate of 5.8% or recurring deposits of private sector banks or small finance banks with an interest rate of up to 8%, where their deposits and interest earned are safe because they are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to Rs 5 lakhs.

Story first published: Monday, October 4, 2021, 10:35 [IST]
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