Fixed deposits continue to be among the top choices for investments from individuals who prefer earning consistent returns without taking major risks in the market. One of the NBFCs that have established itself with a fixed deposit scheme in terms of interest rates is Shriram Finance. Nonetheless, a common question posed by many investors about it is, Is Shriram Finance FD safe?
It is necessary to have a clear idea about the NBFC fixed deposits and regulations governing Shriram Finance. Unlike fixed deposits offered by banks, the fixed deposits of Shriram Finance are provided by a company which is under the regulatory authority of the Reserve Bank of India (RBI). Even though the RBI regulates the company, there is no assurance given by the RBI regarding repayment of deposits. It is essential to have a thorough knowledge about the financial status, credit rating, and overall performance of the company before making an investment.Shriram Finance Limited is one of the largest retail NBFCs in India, catering to millions of people in India. The company has vast experience in providing various financial products like vehicle finance, small business loans, and personal loans.
Credit Ratings Play an Important Role
The credit rating of an FD is one of the most reliable yardsticks for the safety of the FD. Fixed deposits issued by Shriram Finance have been awarded highly safe credit ratings by reputable credit rating agencies like CRISIL and ICRA. This means that the company has good ability to fulfill its financial commitments and repay its depositors; however, there is no investment without risk. Credit ratings are periodically re-rated depending on profitability, quality of assets, liquidity, and capital adequacy of the company. High ratings denote positive financial health of the company.
It is also essential to bear in mind that the Shriram Finance FDs are not the same as bank fixed deposits. Bank deposits in India have insurance coverage under the Deposit Insurance and Credit Guarantee Corporation (DICGC), up to a certain amount, whereas fixed deposits of non-banking finance companies (NBFC) have no such coverage.
What Makes Shriram Finance FDs Attractive?
Many people opt for Shriram Finance Fixed Deposits due to the fact that the interest rates are usually high compared to interest rates offered by bank FDs. The firm also offers flexible investment periods where the investor gets to decide according to his/her needs. Senior citizens get an added interest rate advantage compared to normal interest rates offered, thus making these FDs suitable for retired people looking for a constant income. Investors can also decide whether they would like to go for cumulative or non-cumulative based on whether they would like to get their interest payments regularly during the investment period or at maturity period.The other factor that makes these FDs appealing is the extensive customer base that the company possesses and the various lending businesses. Since the firm has many different lending businesses, it is able to get its income from different sources rather than being stuck in one source only.
Should You Invest in a Shriram Finance FD?
The suitability of a Shriram Finance FD will depend upon the financial goals and risk appetite of the investor. An investor who is keen on earning steady income may find such a fixed deposit to be suitable, provided that the rate of interest offered by it is attractive. It is generally suggested that one must not invest all his money into one investment product. Investing in various kinds of financial instruments can lower down the risk level. Before going ahead and making such an investment, it is best if one compares the rate of interest, maturity period, withdrawal conditions, and taxation aspect of the FD with other available fixed income investment options like bank FD, post office, and other high-rated corporate fixed deposits.
Final Verdict: Is Shriram Finance FD Safe?
To most investors, the fixed deposits by Shriram Finance have been rated as one of the more dependable investments by an NBFC due to the company’s track record, RBI compliance, and favorable credit ratings from reputable rating agencies. From this, we can deduce that the company has the capacity to honor its financial commitments under normal operating conditions.Nevertheless, it is imperative to note that there is always a certain degree of risk involved in all investments. This is because the fixed deposits offered by the NBFCs are not insured under the DICGC deposit insurance unlike those in banks. For this reason, investors need to consider the financial standing of the company, current credit ratings, personal investment objectives and risk tolerance levels as well.In light of the above information, for investors looking to earn better fixed income investments despite the riskier nature of corporate fixed deposits, FDs offered by Shriram Finance are one possible choice upon thorough evaluation. Analysis of the interest rates, credit ratings and other details of the company will help in making the right decision.