Fixed Deposit

The increasing focus on growing money has ushered in a wave of investment avenues, engineered to offer higher returns. When you invest, you do so to make your savings inflation-proof while creating wealth to provide for your future needs. While there are several growth-oriented investment avenues that can help you grow your money, it is prudent to diversify your investment portfolio smartly.

There are many low-risk investment avenues like Public Provident Funds, Senior Citizens’ Saving Schemes, bonds, savings accounts, but investors seek safety of capital with assured returns. Hence, investing in instruments carrying a low-risk preferential, such as fixed deposits, can ensure that you don’t endanger your capital.

What are safety ratings on your fixed deposit?
When investing in fixed deposits, you may come across the option to invest in company fixed deposits or bank fixed deposits. While company fixed deposits offer higher returns than bank fixed deposits, they can carry certain amounts of risk too. But, you can sidestep this by looking at the CRISIL or ICRA rating Scale given to a fixed deposit before you commit to the investment.

CRISIL and ICRA are credit rating agencies, which determine the creditworthiness of your investment. Higher ratings by these agencies can ensure that your investment is safe. However, lower ratings may be indicative of greater risk.

ICRA Ratings and their impact on your FD investment
Usually when choosing financiers for investing in FDs, investors tend to focus only on higher returns and high interest rates. However, this could pose an additional risk, involving loss of money or delayed repayments.

With ICRA unbiased credit rating however, you can form an opinion on the risk types affecting the relative ability of any financier to service your principal repayments and interest payment obligations. These ratings enhance the transparency in financial markets, so you can compare these ratings and choose the right financier offering higher interest rates, while also possessing higher safety ratings by ICRA.

What are ICRA ratings based on?
ICRA ratings are awarded on the basis of several factors, which include available information, analysis made, and interactions with the management. Here’s a look at the different factors, which impact ICRA’s ratings:

  • Track record of the company.
  • The opportunity available in the sector in which the company operates.
  • Past history of the company with regards to payout.
  • Experience of the company’s management team.
  • The company’s scope for future growth.
  • Risk management mechanism of the company.
  • Diversified offerings by the company.

If you’re looking to determine the ratings awarded by ICRA, here’s a brief lowdown:

  • MAAA: It is the highest credit rating and implies that the FD carries the lowest risk possible.
  • MAA: This is a high credit rating that is assigned to financial institutions who carry low risk.
  • MA: Financial institutions that pose an average risk of default are given this rating.
  • MB: Financial institutions who are assigned this rating have an above average chance of defaulting on your deposit.
  • MC: This rating is given to fixed deposit issuers who have a high possibility of defaulting.
  • MD: Financial institutions that have this rating are best avoided. It is the lowest rating that ICRA issues which means that there is a very slim chance that you will get the money you were promised.

To have a detailed understanding of FD ratings, you should know that ratings from MAA to MC carry modifiers: + (plus) or – (minus). As per this system MAA+ is one rank higher than MAA and MAA- is one rank lower than MAA.

After understanding ICRA ratings for fixed deposits invest in one from financial institutions such as Bajaj Finance. Its Fixed Deposit(FD) has ICRA’s MAAA rating which implies that your money is safe and that you have no reason to worry.

Bajaj Finance also offers a competitive rate of interest. For a cumulative Fixed Deposit (FD) that you hold for at least 36 months you can earn interest of up to 8.75% if you are a regular investor. If you’re a senior citizen this rate increases to 9.10% as long as the tenor of the FD and type of interest stay constant.