2 recurring deposits for bond investors with returns above 8%


oi-Vipul Das


Recurring deposits (RD) are a type of leveraged investment product that has a variable term typically ranging from 6 months to 120 months and requires fixed monthly contributions, similar to mutual fund SIPs. It is a highly sought after instrument due to its zero risk and can be used both short and long term. Recurring deposits are ideal for investors who want to build up their savings as they offer assured returns and deposit protection up to Rs 5 lakhs, which is insured by the DICGC.

The key thing to remember here is that banks charge 10% TDS if RD interest income exceeds Rs 40,000 for non-elderly citizens and Rs 50,000 for elderly citizens during a financial year. A 20% TDS is charged to people who do not provide their PAN details to the bank. For risk-averse investors who want higher returns than FDs but don’t want to invest in risky instruments such as debt mutual funds, here are two recurring deposits you can bet on in 2022 to earn more than 8 .00% yield.

Shriram City Union Finances

Shriram City Union Finance, a renowned Non-Banking Finance Company (NBFC) in India, offers a recurring deposit system with variable term choices ranging from 12 to 60 months. Depending on your personal financial needs, you can set the duration and amount of the regular monthly investment. Customers with recurring deposits can choose between automatic repayment and conversion to a fixed deposit, as well as flexible interest payments. Shriram City’s recurring deposits have an ICRA rating of “MAA+/ with stable outlook”, indicating excellent credit quality. Shriram City offers an attractive interest rate of 8.50% on recurring deposits, which is well above the rates offered by major public, private and even small finance banks.

Corporate RDs or recurring NBFC deposits are not guaranteed by the DICGC, which is an important consideration here. They are, however, rated by several rating agencies, and higher or stable ratings may help reduce the risk of default involved, but not entirely. On the other hand, the Shriram Transport Finance Company (STFC) offers a recurring deposit scheme with similar benefits. The Shriram Transport Finance Company (STFC) RD, on the other hand, has been rated “FAAA/Stable” by CRISIL, indicating the level of security of your deposits, and “MAA+/ with Stable Outlook” by the ICRA, indicating the quality credit. Both NBFCs provide over 8% return on recurring deposits shown below.

Period (months) Rate % (pa at monthly rests)
12 7.03
24 7.12
36 8.18
48 8.34
60 8.5
Source: Official NBFC website

Northeast Small Finance Bank

Let me start with deposit security and inform you that deposits in smaller financial banks are also covered by DICGC, which is an important consideration here. The North East Small Finance Bank is now the only bank in the country to pay an interest rate of 7.50% to the general public and an interest rate of 8% to the elderly. The coolest thing is that these rates are applicable on deposits maturing in two years. So, in terms of short-term investment, investing in North East SFB Recurring Deposit is a good bet considering the security of the deposit and higher returns.

Mandate Regular interest rates pa Senior
3 months 4.25 4.75
6 months 4.5 5
9 months 5.5 6
1 year 5.5 6
2 years 7.5 8
3 years seven 7.5
4 years seven 7.5
5 years 6.5 seven
More than 5 years up to 10 years 6.5 seven
Source: Bank website

Article first published: Friday, February 11, 2022, 8:33 a.m. [IST]

Carol M. Barragan