Corporates cut FD rates as credit flow looks up

A combination of declining bank rates and improving credit lines is prompting many companies to reduce interest rates on public fixed deposit (FD) schemes floated some months ago when money supply was tight.

Fixed deposit schemes launched by companies such as Mahindra & Mahindra, HDFC, ICICI, Tamil Nadu Power Finance, Sidbi and PNB Housing, amongst others, now offer interest rates between 8% and 10%, down 50-100 basis points over the rates offered six months ago.

Corporate fixed deposit schemes became popular with investors for a brief while towards the second half of 2008 and early-2009, as these schemes offered 11-13% returns. Companies found corporate fixed deposits an easy way to raise money (to meet working capital needs) when banks and other institutional lenders suddenly tightened their purse strings late last year. Around 40 companies had launched corporate fixed-deposit schemes during the second half of 2008, each competing with he other to borrow capital from retail investors.

“Those times were different. Getting credit had become very difficult and companies were left with no option but to approach small investors. Things have changed now; the liquidity situation has improved. Banks and other financial services institutions are more amenable to lend money now,” said Haribhakti Group managing CEO Shailesh Haribhakti.

Another reason for reduced pay-out is the fact that reference rates (bank rates) have come down significantly over the past six months. “Most companies link their coupon rates to the rate set by RBI. Rated issuers (companies) dictate terms now because as much as they need funds, investors too need a secure (and comparatively better yielding) asset class to park their money,” said Bajaj Capital senior vice-president Surajit Mishra.

Still, not all issuers have reduced interest rate on their public borrowings. Tata Motors FD scheme — which has collected close to Rs 1,200 crore (since December 1), according to market sources — still offers fixed deposit interest rates between 10% and 12.8% under various options. Likewise, Exim Bank has also kept its FD rates unchanged at 10%. According to experts, whenever companies want to raise bulk deposits, they tend to keep interest rates higher. Corporate FD schemes typically target conventional savers, retirees and pensioners. Upfront cash rebate is one differentiating aspect (from bank FDs) that makes company deposit schemes click among investors.

“Contrary to the trend, a few companies in manufacturing and realty sectors have raised interest rates by 25-50 bps to attract investors,” says Bonanza Portfolio distribution head Rakesh Goyal.

These companies are desperate to raise funds; being financially weak and on the verge of default, they have no other sources to raise money. Such companies approach small investors, offering higher interest rates. They are even ready to hand-out 4-5% as brokerage charges, taking the total cost of borrowing to around 16-17%. Investors should be careful about investing in such companies,” Mr Goyal added.

Source: Economictimes

Mahindra & Mahindra Financial Services invites FD from public

Mahindra & Mahindra Financial Services,a non-banking finance unit of auto major Mahindra & Mahindra, has invited fixed deposits from the public, for the first time after 3 years.

The minimum amount which an investor can invest is Rs 10,000. This is in line with a recent trend where various conglomerates, including the Tatas, have invited the public for fixed deposits, as traditional sources of funds are drying up. The fixed deposits have been rated as FAA+ by CRISIL, which indicates high safety. The yield on a 3-year fixed deposit interest rate is 13.5%. The rates are 11%, 11.5% and 12% for 12 months, 24 months and 36 months respectively.

MMFSL provides Finance for utility vehicles, tractors and cars with a focus on rural areas. It currently has a network of 442 offices and total assets under management of Rs 8,303 crores. It had a net profit of Rs 177 crore in March 2008.

Source: Economictimes

DCB revises fixed deposit rates

DCB the listed state of the art bank, has announced a change in interest rates on its fixed deposits with maturities of one year and above. Interest rates on fixed deposits for one year maturity have been fixed at 10.50%. While for One to Three years the FD rate is 10.25%.

In order to offer choice to its customers, bank has ensured very competitive Fixed Deposit rate across all tenures. In line with this strategy, the Bank has effected only a very small cut of 25 basis points for fixed deposits with a maturity of one year (365 days), which stands readjusted from the earlier 10.75% to 10.50%.

In a statement, Mr. Praveen Kutty Executive Vice President and Head Consumer Banking Group DCB, stated, “The interest rate environment has softened in recent time. DCB remains committed to offering value to its depositors and customers. We have used this opportunity to realign our fixed deposit interest rates in line with our growth strategy. We believe DCB is offering the most competitive deposit rates in the industry for deposits of One year to Three years. DCB customers will benefit from their relationship with the Bank”. The interest rate slabs are effective from February 10, 2009. DCB offers a full suite of Fixed Deposits, and value added Savings account products for the retail customer.

Source:moneycontrol.com

South Indian Bank’s new fixed deposit scheme

The South Indian Bank, will be launching a new fixed deposit scheme “SIB Eighty Plus” to commemorate its 80th year celebrations.

Addressing presspersons here on Thursday, deputy general manager and head of Bangalore region of the bank Thomas Joseph K said SIB Eighty Plus offered its customers 11 per cent fixed deposit interest rate per annum for 39 months on a minimum deposit of Rs 50,000. As an additional benefit, the depositors would be provided with a free personal accident death insurance cover up to Rs. 1 lakh.

The scheme would offer 11.25 per cent interest to senior citizens.

“The depositor on maturity of a deposit of Rs. 50,000 would get Rs 71,143, while a senior citizen will receive Rs 71,707,” he said. The deposit for domestic and non-resident ordinary accounts would be accepted till March 31, 2009, he added.

The bank will be celebrating its 80th year of existence with a function in Bangalore on January 24.

The Regional Director, Reserve Bank of India, will inaugurate the celebrations while chairman of the bank G.A. Shenoi will preside over the function. Mr. Thomas said the will complete 50 years of service to Karnataka on June 29, 2009.

The bank has got a CBS branch network of 31 branches and 11 ATM centres in Karnataka. I

n Bangalore, the bank has opened five branches during this fiscal and has plans to open another five branches, he added.

Source:thehindu.com

OBC cuts rates on NRI deposit schemes

City-based Oriental Bank of Commerce (OBC) on Wednesday said it lowered the interest rates on deposit schemes for non-residents up to 81 basis points.

Announcing the changes in its offered interest rates for FCNR (B) term deposits, the lender, in a statement, said the revised Fixed Deposit interest rates are effective from Feb 1.

"FCNR (B) deposit rates have been revised on all maturities from one to five years for US dollars, British pound, euro, Australian dollar and Canadian dollar," it said.

USD FCNR (B) deposit rate for one to two years has decreased to 2.98 from 3 per cent earlier, GBP deposit to 3.48 from 4.07 per cent, EUR deposit to 3.28 from 4.06 per cent, AUD deposit to 4.84 from 5.65 per cent and CAD deposit to 3.30 from 3.47 per cent

Source: financialexpress