The Life Savers Called Online FDs
June 10, 2018 4 Comments
The one good think about fixed deposits is the absolute predictability of returns, as long as they are not closed prematurely. Add to this that unlike a lot of other fixed income instruments, fixed deposits are available for all tenures upto 10 years, and you can now use fixed deposits to design your own financial products.
The only drawback is the extremely low deposit insurance in India.The Deposit Insurance and Credit Guarantee Corporation provides insurance to each customer of a Scheduled Bank for deposits up to Rs 1 lakh in case of bank failure. This limit is applicable across all the deposits, including savings, current, fixed and recurring. This limit remains Rs 1 lakh even if the sum of all deposits (including accrued interest) exceeds the same. Worse, non-scheduled banks ,companies and other institutions offering fixed deposits don’t provide this small comfort either. Of of what use is predictability of returns if basic security and return of capital is not guaranteed ? Read more of this post
Kenneth Andrade holds that India is transiting from a high to low interest rate economy.
Kenneth Andrade has a hunch that the banking cycle recovery will be prolonged this time, compared to the previous two cycles.
A non-convertible debenture is a fixed income instrument where the issuer agrees to pay a fixed rate of interest to the investor. An NCD cannot be converted into equity of the issuing company unlike convertible debentures.NCDs are good substitutes for fixed deposits,especially company deposits.
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