Avoid the temptation of high returns, losses may occur

These days banks are getting low interest, but many NBFCs are offering high returns. High returns may be tempting, but it is very risky.

Highlights

• Many NBFCs are offering higher interest or simply returns.
• Most NBFCs take loans from banks and then lend at higher interest rates.
• Many of these NBFCs are such that they can default in repaying the loan.
• At present, the supply chain is stalled, making it risky to invest in NBFCs

State Bank of India has recently reduced interest rates on deposit money. Interest is paying 2.9 percent for a 45-day FD, which is only slightly higher than the interest paid on savings account from the bank. On the other hand, there are some NBFCs, who are taking advantage of this opportunity and offering more interest. The customer also gets trapped in the high returns and deposits money in such NBFCs, which he does not even know properly. The result is that many times customers have to suffer heavy losses.

Why are some NBFCs not safe?

Most NBFCs take loans from banks and then lend at higher interest rates. Many of these NBFCs are such that they can default in repaying the loan. The supply chain is currently stalled. There are no companies running, no market. The market has just begun to open. If the NBFC does not get help from the government, they will get into a lot of trouble, and chances of default can increase.

How will there be a loss in return for more interest?

Of course, NBFCs offer more interest, but if they are unable to invest their money then they will not benefit and in that case, NBFCs will start losing money. The customer will ask for all his money back, but the NBFCs are not necessarily in a position to return the money, because they are not able to get the money from whom they had given. The reason is the lockdown caused by the coronavirus. In such a situation, NBFCs would like to deposit money from the market by offering more interest, but all this is very risky.

Interest is low, but invest instead of trust

If you know everything about an NBFC, since when it has been in the market and what is its record, then it is fine, but if you have even a little doubt then you will get less interest in the bank, but instead of trust Invest only.