How do Bonds give higher returns than FDs? Is there any risk involved?

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Invest in Gold Loan Backed Bonds from Muthoottu Mini Financiers Ltd.

Earn 11.27% p.a

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Invest in Gold Loan Backed Bonds from Muthoottu Mini Financiers Ltd.

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Frequently Asked Questions

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How do Bonds give higher returns than FDs? Is there any risk involved?

FD rates are lower than bond interest rates. Banks have to maintain CRR(Cash Reserve Ratio) as per regulations laid down by the central bank. The banks have to reserve a portion of capital received via FDs; the entire capital can not be lent. This reserved capital can be utilized to supply closures (or pre-closures) in FD. Such constraints are not there on banks on the capital that is raised via bonds.

Also, only a fixed amount of funds can be raised by a particular Bond tranche’. So the interest to be paid on this fund amount remains fixed and quantifiable to the Bond issuer. Also, to elicit investor interest to invest in Bonds, the issuer keeps the Bond rates higher than Bank FD rates. For FDs, there is no limit to the amount of deposits that a bank can take. Being able to service high-interest rates on such ever-growing deposit rates is financially non-viable. Given these reasons, Bonds can offer better returns than Bank FDs.

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