High yielding debt instruments than FDs - Fusion - WeRIndia

Many people prefer bank fixed deposits to avoid any risk. However, there are ways to improve your investments so that you can beat inflation and maximize returns. There are certain debt instruments that yield higher returns than bank fixed deposits. Here are some of them.

Company fixed deposits

When you invest in bank fixed deposits, the maximum interest rate you get is around 7.5 percent. However, if you invest in company fixed deposits, you can increase your returns. Many people believe that company fixed deposits are not safe; however, that is not the case. You can try investing in something like Kerala Road Transport Development Finance Corporation which offers interest rate of 10.00 per cent on 1, 2 and 3 year deposit under Rs 25 lakhs. These kinds of deposits are very safe and also offer higher returns than banks.

Non-convertible debentures

Non-convertible debentures are instruments with fixed interest. They are listed on stock exchanges.

Corporates issue them with a fixed tenure. In order to be safe, you can buy a listed NCD of India Infoline or Shriram Transport. They can give yields as high as 12 per cent. Such interest is not possible with bank fixed interests.

Try tax free bonds

You can invest in tax free bonds if you are in the 20 percent or 30 percent tax bracket and if you are paying taxes. These tax free bonds are listed on the stock exchanges and you can buy from there. From these bonds you can get 8 percent interest which is tax free. The returns you get on the bank fixed deposit are taxed.

Consider a return of 7.5 interest rate return from banks. After paying taxes, it would amount to only about 6.75 percent. This means that the returns on the banks are pretty low compared to tax free bonds. Try getting bonds from safe government companies like HUDCO, Indian Railways Finance, National highway Authority of India etc.

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