NEW DELHI, January 29: After banks, it's now the turn of non-banking finance companies (NBFCs) to raise their fixed deposit (FD) rates. Led by Cholamandalam Investment Trust and Lloyds Finance, a number of NBFCs have hiked their FD rates by 50-150 basis points.However, the higher rates may not see a rush of deposits as investors are yet to recover from the NBFC scare in the post-CRB era. As a top NBFC official puts it: "The rise has more to do with the re-alignment of rates after the bank rate hike. We are hiking our rates because we want to make them more comparable with the prevailing market prices; our intention is not to garner deposits as we know that most investors would prefer to put their money in banks which are offering very attractive rates."
While Cholamandalam Finance now offers 13.80 per cent (monthly) on a one-year deposit compared with 12 per cent earlier; the interest rate on the two- and three-year deposits is 14 per cent (as against 13 and 13.50 per cent, respectively). Similarly,Lloyds Finance has revised its rates and is currently offering 14 per cent on a one-year deposit, 14.50 per cent on a two-year deposit and 15 per cent on a three-year deposit. In the case of Lloyds Finance, the revision in rates is puzzling as the company's total FD base is around Rs 540 crore which is close to the RBI ceiling prescribed for the company. As it has been rated AA+ by CARE, Lloyds Finance can raise up to two times its net-owned funds of Rs 270 crore.
Kotak Mahindra Finance has also decided to hike its rates by 0.5 per cent and is offering 13.5 per cent, 13.75 per cent and 14 per cent on its one, two and three-year deposits, respectively. Even the much sought-after HDFC has revised its FD rates upwards and now offers 0.5 per cent more on its one-year deposit (10.5 per cent) and one per cent more on its two- and three-year deposits (11.5 and 12.5 per cent, respectively).
However, this time round only top-rated NBFCs will be able to hike their FD rates and, hence, an across-the-board rise inrates is unlikely, thanks to the recent RBI guidelines. While some AAA-rated companies (which can raise up to 3 times their net-owned funds) have jumped on to the bandwagon, there are many which have refused to join the fray. Sundaram Finance, for instance, has said it is unlikely to raise its FD rates. Says an official: "Only short-term rates are going up; in the long run, rates are flat. As we focus mainly on long-term deposits in view of our liabilities, we are unlikely to raise our FD rates. Besides, we do not really need the money."
Even Apple Finance says a rate revision is not on the cards. Says a senior official of the company: "Raising money through FDs is a costly proposition. As a conscious decision, we have decided to rely on low-cost funds through bank credit and debt securitisation. In fact, for the last five-and-a-half months, we have not collected any deposits." He, however, said this move had nothing to do with RBI's prescribed limit as the company's AAA rating enables it to raise around Rs880 crore compared with the current FD base of Rs 300 crore.
Most other NBFCs have no option but to watch others revise their rates. Take the case of Alpic Finance, which has an FD base of around Rs 245 crore. The FAA- rating assigned to the company allows it to raise only one time its net-owned funds of Rs 189 crore. So, instead of accepting deposits, it actually has to refund deposits. Says a company official: "We are thrashing out the matter with the RBI and, hence, are currently in no position to hike our rates even if we require the funds."
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
