People are now deviating from investing in Bank Fixed Deposits (FDs) to investing in non-banking companies. One of the primary reasons for this change is the high-interest rates as compared to that of banks. However, there is much more to an NBFC (Non-Banking Financial Company) than high-interest rates. Financial experts’ suggest opting for an NBFC in case of investing in FD is the right choice until you check the security of the invested money. Credit rating companies such as CIBIL (Credit Information Bureau India Limited), ICRA Rating (Investment Information and Credit Rating), CARE (Credit Analysis and Research Limited), CRISIL (Credit Rating Information Services of India Limited), ONICRA (Onida Individual Credit Rating Agency of India), and ICRA (Investment Information and Credit Rating Agency of India) rank the non-banking financial companies as per their fund performances. This rating helps the customers in choosing the right financial provider in terms of the credibility of the company.
How Does the Credit Rating System Work?
The assessment of the financial provider on the basis of its ability to repay the deposited money is defined as the credit rating of that particular entity. You can get to know the creditworthiness of the financial institution with the credit rating. Higher the rating, higher is the stability of the company. Also, high credit rating reflects a good repayment history of the company meaning that your money shall be secure as well as repaid to you on time without any hassles. On the other hand, if you invest in a low-credit rated company, the chances of losing your invested money increases or the money shall be repaid to you with lots of hassles and delay.
The credit rating companies assess the quantitative and qualitative creditworthiness of the financial entity. It allows you to take an informed decision by considering the risk factors associated with the investment as well as the past fund performance of the company. Financial companies can use this rating as a tool of marketing and establish themselves in the corporate industry efficiently. The companies can build an image around their credit rating and seek help using it at the time of fundraising. NBFCs can get approval for their loans efficiently using their credit ratings as an asset. Entities with high credit ratings can avail loans with low-interest rates. Credit rating companies not only rates NBFCs, but also evaluates local government bodies, non-profit organizations, special purpose entities, state governments, securities, and countries. Some of the factors considered for credit rating are the type of debt, level of debt, the ability of the company to lend and borrow repayment history, etc. Also, these ratings serve as a benchmark for the regulations in the financial market. The credit ratings are published on the website of the credit rating agency as well as on the website of the rated entity. ‘AAA’ rating indicates the highest ranking and stability and D is considered as the default ranking. Financial institutions like Bajaj Finance has accredited with FAAA and MAAA highest credit rating from CRISIL and ICRA Rating respectively. The highest credit rating reflects the highest stability of the financial provider.
Apart from the FD rates in India and the credit rating of the company, you need to look for the other factors such as flexibility in choosing the tenor, interest payout frequency, minimum deposit, and facility to take a loan against FD in case of emergencies. You must make sure to read the fine prints of the company policy so as to avoid any kind of disappointments in the future. You can also ask for the details to the customer care representative of the chosen financial provider.
How to Apply for an FD in an NBFC?
The procedure of applying for an FD may vary amongst the financial providers. However, the standard online application procedure is as follows:
Find the online application form of your financial provider and fill the necessary details
Keep the required documents handy and submit them along with the application form
Deposit the amount online using NEFT/ RTGS/ Cheque, etc. and wait for the completion of the application procedure.
You can also apply for an FD offline by visiting the nearest website of the financial institution of your choice. With FD Interest Rates Calculator, you can estimate the returns of the investment after the maturity period.