Procedure to open a fixed deposit account in NBFCs?

Fixed Deposit (FD) is the popular investment vehicle because of stable return and protection of capital it offers. You can also use your fixed deposit to access your fund in an emergency. To comply with regulations by RBI and proper identification of the rightful owner of the fixed deposit, you have to complete certain formalities, called KYC (Know Your Customer) process. Many people find it difficult and time-consuming to visit the bank multiple times to complete paperwork to open the fixed deposit. However, the process is simplified when you apply a fixed deposit through reputed NBFC.

Keep Your KYC Documents Ready

For any financial transaction, particularly investment, need your KYC (Know Your Customer) documents ready. Most essential documents are PAN card and your address proof. You can submit any document like electricity bill, election card, driving licence or passport as your address proof. Based on individual circumstances, the company may ask additional documents if it is necessary to fulfil regulatory compliances. Make sure you submit every required document, failing to do so may delay or reject your Fixed Deposit application.

Fill Up the Form with Complete Details

Leaving empty places in the form may delay your application to open a fixed deposit. Any error in details may lead you to trouble either in opening the fixed deposit or at maturity. Always mention nomination details, as it simplifies the process for your next kin to claim the amount in case of your unfortunate absence. Any missing or incomplete details may lead to a delay in booking your Fixed Deposit.  Nowadays many companies like Bajaj Finance provides you with the facility to fill up the form online. Once you submit the form, the company executive calls you to complete the process including your documentation. Hence, your paperwork and efforts are much lesser as compared to the traditional method of opening the fixed deposit.

Select Correct Duration and Type of FD

The FD interest rates are different for different duration of fixed deposit. Based on your future need, you can select the correct duration. There are special duration FDs like 15 months or 555 days that pay higher interest rate than regular FD.  The FD is booked on a cumulative or non-cumulative basis. If you expect your money to grow over time, consider booking a cumulative fixed deposit. Here the interest amount is added back to the principal and your money gets the power of compounding. In case you need regular monthly income, you can book non-cumulative Fixed Deposit. You will have an option to avail interest amount on monthly, quarterly, half-yearly or yearly basis. Usually, the interest rate in the cumulative deposit is higher than non-cumulative fixed deposit. You can use online FD calculator to know exact amount of interest in each case.

Simplified Process for Existing Customers

Many NBFCs provides you simplified process if you are their existing customer because your KYC details are already available with them. For example, Bajaj Finance accepts your application online by authenticating you through your mobile number and PAN card, if you are an existing customer. In such a case, no more paperwork is necessary; you can automate the FD process completely online. Moreover, you are eligible for an additional interest rate of 0.25%.

Word of Caution Before You Take Final Call

There are several NBFCs in the market offering a fixed deposit interest rate that is higher than the bank’s FD. However, not every fixed deposit is equally safe. It is very difficult for a common investor to find out true financial position of the company. Many investors put their hard earned money into the risk to avail a higher rate of interest. It is nothing wrong to avail higher interest, but you should check credit quality and repayment history of the NBFC. The easiest way to do this process is to check credit rating provided by CRISIL and ICRA. These both institutions are independent credit rating agency in India, who conducts a financial audit of the company and finds credit quality of their investments. Based on their finding, they rate the company or investment from the grade AAA to D. The AAA grade indicates the highest degree of investment, showing very strong possibility of timely repayment of principal and interest. While investing, make sure that your FD is rated FAAA by CRISIL and MAAA by ICRA.