Types of fixed deposit
There are two types of fixed deposit offered by Bajaj Finance:
a. Cumulative fixed deposit: In a cumulative fixed deposit plan, the interest is accrued over the deposit's duration and paid at maturity. FD rates are often greater for longer deposits.
b. Non-cumulative fixed deposit: On the other hand, the interest payment is made on a monthly, quarterly, half yearly, or annual basis under a non-cumulative fixed deposit.
What is a treasury bill?
A money market instrument released by the Indian government is known as a Treasury Bill. It is issued as a future repayment promissory note. A treasury note is used to raise money to satisfy the government's short-term cash needs.
Types of treasury bill
Treasury bills have a maximum tenure of one year. Basis the maturity period, the treasury bills are classified into four types:
Maturity period
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Auction frequency
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Minimum investment
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14 days
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Every Wednesday
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Rs. 1 lakh
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91 days
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Every week
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Rs. 25,000
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182 days
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Every alternate week
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Rs. 25,000
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364 days
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Every alternate week
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Rs. 25,000
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Key differences between Fixed Deposits & Treasury Bills
Both FD and treasury bills are profitable and low-risk investment choices for your portfolio. However, there are some differences between them. Here is a comparison of the two basis multiple parameters.
Profitability in terms of interest
Both fixed deposits and treasury bills can be rewarding investments. The interest gained by investing in a treasury bill is definitely higher than the interest offered by bank fixed deposits. The FD interest rates of most banks are up to 7% p.a. while the treasury bill rate for 2023 is up to 7.750% p.a. While this is high, a company fixed deposit offers an even higher rate of returns. Bajaj Finance Fixed Deposit offers interest rates up to 8.85% p.a.
Flexibility in withdrawing funds
Fixed deposits allow premature withdrawal of the funds that you have invested, but at a penalty charge. This also hampers your gains as you stand to lose interest when you withdraw your investment before maturity. When it comes to liquidating your investment in treasury bills, you can redeem them during government auctions held very frequently. They are issued to you at a discount and sold at face value; the difference is the interest you get. Treasury bills are issued for a short-term, as less as 91 days, and may be redeemed easily. Thus, allowing you more liquidity than FD, the shortest tenure for which is 12 months.
Risk-factor and credibility
As a government can never run out of funds, treasury bills are perceived as risk-free investments. A fixed deposit scheme does not depend upon the influence of market forces and bank FD are regarded as the safest. The Bajaj Finance Fixed Deposit has high stability ratings of CRISIL AAA/ STABLE and [ICRA]AAA(Stable), making it more reliable.
Tax benefits and service fees
Treasury bills are tax-exempt; however, you will be required to pay a bank fee for the services rendered. The interest gained by fixed deposits is taxable annually when it exceeds Rs. 10,000 (for individuals) and Rs. 50,000 for senior citizens. So, when you need to make a choice between a fixed deposit and treasury bills, consider factors like interest, security, and tax benefits and go with the option that best suits your financial needs.
A treasury bill is a good short-term investment option, however if you are looking for profitable returns for a longer duration, investing in Bajaj Finance FD is a good option. You can now start investing with just Rs. 15,000 and earn returns up to 8.85% p.a.
