Financial planning conversations often begin with a simple question: how do I protect what I have while still earning a reasonable return on it? That question becomes even more pointed for investors sitting in the higher income brackets, where every additional percentage point of return matters, but so does the safety of the principal. Ashutosh Financial Services has long held the view that good financial decisions grow out of good financial understanding, and its regular educational sessions are designed around that belief. The recent webinar on fixed deposits of top-class NBFCs was one such initiative, aimed at helping investors look past headline interest rates and understand what actually makes a fixed deposit a sound choice.
The session, titled “Attractive Investment Option for Interest Income – Fixed Deposit of Top Class NBFC 2019,” was held on 15th January 2020 as a webinar, allowing participants to join remotely at their convenience. It was addressed to a High Net-worth Individual (HNI) audience and led by Mr. Daxesh D. Kothari, Tax and Financial Consultant, and MD & CEO of Ashutosh Financial Services. HNI investors typically have a distinct set of priorities: they are less concerned with chasing the highest possible yield and more concerned with capital safety, predictability of income, and how an investment interacts with their overall tax position. The topic was chosen with these priorities in mind.
The session opened by addressing a tension that many fixed-income investors quietly grapple with: the desire for safety and the desire for a better rate of return often seem to pull in opposite directions. Mr. Kothari’s central argument was that this need not always be the case, provided investors know where to look. He directed attention to the fixed deposit schemes offered by Bajaj Finance Ltd. and Mahindra & Mahindra Financial Services Ltd., both of which are Non-Banking Financial Companies, or NBFCs, backed by well-established business groups with a long operating history. Unlike banks, NBFCs are financial institutions that lend and take deposits but do not hold a full banking licence, and their fixed deposit products often carry higher interest rates than comparable bank deposits, though they also carry a different risk profile that investors should evaluate through credit ratings and company fundamentals rather than assuming automatic safety.
To illustrate the financial strength of these companies, the session pointed to market capitalisation figures, a measure of a company’s total value as reflected in its share price multiplied by the number of outstanding shares. As of October 2019, Bajaj Finance Ltd. was valued higher in the market than the State Bank of India itself, a comparison used to underline that scale and financial muscle are not the exclusive preserve of public sector banks.
A significant part of the session was devoted to comparing actual interest rates on offer. At the time of the presentation, Bajaj Finance Ltd. offered cumulative fixed deposit rates ranging from around 7.6% for a one to two year tenure up to 8.1% for deposits held between three and five years, with existing customers and senior citizens eligible for slightly higher rates. Mahindra & Mahindra Financial Services Ltd. offered similarly structured rates, with cumulative options touching 8.25% for tenures of three years and beyond. These were set against the prevailing State Bank of India fixed deposit rate of 6.1% for non-senior citizens across most tenures, a gap of roughly two percentage points that becomes meaningful over a multi-year holding period.
Mr. Kothari also explained the distinction between cumulative and non-cumulative deposit options, a choice every fixed deposit investor eventually has to make. In a cumulative deposit, interest is compounded and paid out along with the principal at maturity, which suits investors building wealth over time. In a non-cumulative deposit, interest is paid out at regular intervals, whether monthly, quarterly, half-yearly, or yearly, which suits investors who need a steady income stream. The session made clear that this decision should be guided by an individual’s cash flow needs rather than by the rate alone.
A recurring theme throughout was the idea that these fixed deposits are particularly well suited to investors who fall into lower income tax slabs, such as 5% or 20%, or who are not taxable at all, since the interest earned is added to taxable income and taxed at the investor’s applicable slab rate. For such investors, the effective post-tax return on a high-yielding NBFC fixed deposit can compare favourably with many alternative fixed-income instruments. The session also noted that these deposits suit investors comfortable locking in a fixed rate of interest for a longer period, sometimes beyond five years, in exchange for that rate certainty.
Sessions like this one reflect why continuous financial education matters, particularly in a fixed-income landscape where rates, ratings, and product structures shift over time. Ashutosh Financial Services continues to organise such initiatives, believing that investors who understand the mechanics behind an investment product are better placed to make decisions that genuinely serve their long-term financial wellbeing.
