Final Up to date on August 30, 2021
When financial institution mounted deposits decreases, as normal, senior residents ignore credit score danger and chase after “excessive return company FDs”. The newest craze, Tamil Nadu Energy Finance Fastened Deposit providing as much as 9.11% return on a 36 to 60-month deposit for senior residents. Here’s what it is advisable learn about these allegedly “Absolute Security & Assured Revenue” FDs.
Are Tamil Nadu Energy Finance Fastened Deposits assured by the Tamil Nadu Govt? No, they aren’t. The declare of “Absolute Security & Assured Revenue” made on their webpage is simply a gross sales pitch. Their means to pay curiosity on time will depend upon their monetary scenario. Hundred per cent govt-owned doesn’t imply 100% protected. The EPFO can also be govt owned however has been chronically delaying curiosity fee: Delay in EPF curiosity fee: Is there a loss to subscribers?
Are Tamil Nadu Energy Finance Fastened Deposits protected? They’re comparatively safer than a non-public company deposit. That doesn’t imply curiosity funds will at all times be paid on time. It solely means, finally you’ll get your a refund due to the TN governments involvement if the ability finance company will get into bother.
What does the Tamil Nadu Energy Finance and Infrastructure Improvement Company Restricted do? It’s a Non-Banking Finance Firm wholly owned by the Tamil Nadu Govt. It borrows cash from the general public by way of bonds and deposits and affords loans to just one firm: Tamil Nadu Technology and Distribution Company Restricted (TANGEDCO) aka Tamil Nadu Electrical energy Board (TNEB).
Are Tamil Nadu Energy Finance FDs coated by deposit insurance coverage? No.
What are the dangers related to Tamil Nadu Energy Finance Fastened Deposits?
- Since they lend solely to the TNEB, the profitability of 1 impacts the opposite. TNPFs revenue after tax fell from 129.74 Crores n FY 2016-17 to 87.68 Crores in FY 2017-18 and to 83.20 Crores in FY 2018-2019.
- TNPF’s capital adequacy ratio fell to 7% in March 2019 as in opposition to the really helpful minimal of 10%. This can be a measure of how succesful a borrower is of assembly its obligations in case there’s a dip in profitability. The TN govt needed to infuse capital to carry again as much as 12% as of March 2020. Supply: Brickworks ranking rationale
- TNEB has estimated a lack of Rs. 1260 crores as a result of lack of demand after the lockdown. This implies the destiny of each firms (TNEB and TNPF) are closely depending on the financial stimulus bundle introduced for energy distribution corporations.
- Tamil Nadu governments backing is the prime promoting level for these FDs. Nonetheless, like most state governments, the TN govt is bankrupt as a result of lockdown. Due to this fact this might be a case of the centre printing cash (digitally, not actually) to help the TN govt. Then the TN govt utilizing it to help TNEB and the TNPF.
Can senior residents put money into Tamil Nadu Energy Finance Fastened Deposits? Sure, however solely to a small extent which is not going to change their lives a lot. Higher to have the monetary backing of their youngsters, simply in case.
Can we make investments on-line in Tamil Nadu Energy Finance Fastened Deposits? Sure. In a savvy transfer, the company has made on-line investing doable.
What’s the minimal funding? Rs. 25,000 and above that in a number of of Rs. 1000.
What are the rates of interest and period particulars? There are two choices, common curiosity fee (ominously labelled RIP) and a cumulative choice.
Rates of interest for normal fee
| Non-senior residents | |||
| Interval (Month-to-month) | Month-to-month (%) | Quarterly (%) | Yearly (%) |
| 24 | 0 | 7.8 | 0 |
| 36 | 8.25 | 8.31 | 8.57 |
| 48 | 8.25 | 8.31 | 8.57 |
| 60 | 8.25 | 8.31 | 8.57 |
| Senior Residents aged 58 and above | |||
| Interval (Month-to-month) | Month-to-month (%) | Quarterly (%) | Yearly (%) |
| 24 | 0 | 8.05 | 0 |
| 36 | 8.75 | 8.81 | 9.11 |
| 48 | 8.75 | 8.81 | 9.11 |
| 60 | 8.75 | 8.81 | 9.11 |
Rates of interest for cumulative fee
| Non-senior residents | |
| Interval (Month-to-month) | Base Price (% pa) |
| 12 | 7.5 |
| 24 | 7.75 |
| 36 | 8.25 |
| 48 | 8.25 |
| 60 | 8.25 |
| Senior Residents | |
| Interval (Month-to-month) | Base Price (% pa) |
| 12 | 7.75 |
| 24 | 8 |
| 36 | 8.75 |
| 48 | 8.75 |
| 60 | 8.75 |
Is untimely withdrawal allowed? Sure, after three months. No curiosity can be paid if withdrawn earlier than six months. Above that, a penalty of 2-3% on the relevant rate of interest could be levied! That’s steep!
Can we put money into these deposits? The short-term nature of those deposits is each a plus and minus. A plus as a result of the cash is just not locked in for too lengthy. A minus as a result of they’d be topic to excessive reinvestment danger – decrease charge on recent deposits on maturity. Older TNPF FD charges have been near 10.5% and now about 8.75-9%.
The govt. backing is simply an on-paper placebo and doesn’t assure well timed curiosity funds. All it means is, the government will bail out the company whether it is in bother (it already is as a result of TNEB is in bother). With the government itself in bother as a result of lockdown, how rapidly will probably be capable of rush to assistance from TNPF is an enormous query mark.
Due to this fact, in case you want to make investments, have solely a small publicity. Senior residents are higher off maintaining nearly all of their money with PM Vaya Vandana Yojana (2020), Senior Residents Financial savings Schemes, submit workplace deposits and certificates and FDs from too huge to fail banks like SBI. TNPF deposit can solely be a post-meal paan. Not the principle course. Solely non-compulsory and eminently avoidable.
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