Bajaj Finance, HDFC Hike Fixed Deposit Rates Ahead of RBI’s Policy Meet

In what could be interpreted as the first signs of a likely directional change in broader interest costs, Bajaj Finance and HDFC Ltd - India's market leaders, respectively, in consumer financing and mortgage lending - have hiked deposit rates by up to 30 basis points for tenures up to five years. One basis point is 0.01%. 
 
The rate hike which comes ahead of next week's meeting of the central bank's Monetary Policy Committee by both non-banking finance companies (NBFC) . might be a sign of higher future borrowing costs. New deposit rates will apply immediately. 
 
Experts say the move can be seen as a prelude to a change in the interest rate cycle over the next two quarters. To be sure, higher deposit rates would mean slightly higher returns for savers putting their surplus funds into debt instruments. Most experts see higher funding costs and a changing interest environment specially in the one to three-year segment.
 
Bajaj Finance increased corporate deposit rates by 30 basis points for tenures between two and five years. Savers can now earn 6.65% for 24-35-month maturities and 7.05%  for 36-60-month maturities. 
 
Separately, HDFC, India's biggest home financier, sought to realign interest rates in its corporate deposit plans. It raised long-term deposit rates by 5-10 basis points for three-year and five-year categories, but reduced one-year rates by a quarter percentage point. 
 
HDFC is offering a maximum of 6.50% for five-year deposits. 
 
Shorter duration rates up to one-year maturity have risen lately, have risen of late even as the RBI is seen  to be seeking to normalise liquidity flows.
 
 The benchmark yield has not increased much. The 364-day Treasury Bill last week yielded 4.13%, 32 basis points higher than two months ago. Over the same period, the benchmark bond yield rose 12 basis points to 6.33%.
 
Three-year triple-A rated corporate bonds are now yielding in the range of 5-5.25%, about 50-60 basis points higher than the levels seen six months ago.
 

User

  Loading...
  Loading...

To continue


Please
Sign Up or Sign In
with

Email

We are listening!

Solve the equation and enter in the Captcha field.

Changes in Our Business Model
 
 
25th Sept 2020
 
Greetings from Moneylife Advisory Services
 
Between financial years 2019-21, SEBI has come up with extensive changes to investor advisor regulations. On Sep 23, 2020, SEBI had issued new additional guidelines. This comes just two months after extensive changes announced in July 2020. Earlier, in December 2019 there was an ad hoc circular
 
As a result of these changes, IAs, cannot accept fees through credit cards, will have to sign a 26-clause investor agreement, have to maintain physical record written & signed by client, telephone recording, emails, SMS messages and any other legally verifiable record for five years. IAs were already asked to record the suitability and rationale for every piece of advice given, sign them and store them for five years.
 
While these extensive and frequent changes, designed to strengthen the conduct of IAs are well-meaning, these have sharply increased compliance efforts and cost. We, being online advisors, find many of changes harder to implement, compared to advisors working in the physical space. We will have to have an army of advisors, administrative and tech staff to be compliant. If we do this, we will have to divert money to these areas and the cost of our service will double. We want to remain the least-cost service in the market to benefit more and more people. In the circumstances, we are forced to change our business model from “advisory” to “research”. This will mean the following:
 
What remains the same:
  • Recommendations on insurance, investment and Lion stocks, will continue as a part of the MAS premium subscription. Our strength has always been research and this will remain available to you through our recommendations.
  • The magazine and all textual content will remain as part of the service
  • We will have to suspend the restructuring tool.
 
What changes:
  • The interactions in Ask / Handholding will offer investment advice but not specific to your situation. It will offer information on investment products and also clarify your doubts about various financial products. It will be a forum for information, not for advice. This will be implemented with immediate effect and our guidelines in Ask, reflect this now.
 
Over the next few weeks our site and our communication to you will reflect these and other additional changes.
 
We feel this will not affect you much in terms of what really matters in investing: knowing what to buy and when to buy. This is our edge and it will still be available to you.
 
img
Debashis Basu
Founder