Can I put my retiral benefits in KTDFC as it is backed Kerala Government?

Q & A Forum › Category: Fixed Deposits › Can I put my retiral benefits in KTDFC as it is backed Kerala Government?

seema asked 9 years ago

Hi Shri, I have retired early at age of 37.Can I put retiral benefits in KTDFC as it gives very high interests in MIS. Isn't it completely safe as it is backed by Kerala Govt?Also Tamil Nadu Power Finance, it is Tamil Nadu govt company. Is it safe?.Also Suryoday Bank gives 9.75% rate.Is it safe ?

4 Answers

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Sreekanth Staff answered 9 years ago

Hi, Kindly do not invest in any investment avenue just because it give high returns or it is lucrative.. May I know if your investment objective (need) is to get regular income from your retiral benefits? Do you have any other sources of income? Can you afford to take risk? Have you invested in other schemes/securities?? May I know your financial goals??

seema replied 9 years ago

Thanks for the prompt response Shri. Yes my need is a regular monthly income. I do not have any other sources of income.
My financial goals are I need a monthly income for survival and later when markets give an opportunity in the form of a correction, I shall consider transferring my principle to some equity mutual funds with SWP for a monthly income, so that I shall get appreciation in my principle over long term 23 years, when I shall turn 60.
I can’t see any safe monthly income schemes at the moment that does not erode my capital and shall give me close to 38000 per month which is my monthly expense. I cannot afford to put in debt funds as they too might correct and I shall not have the liquidity to invest in equity funds when markets correct. And directly putting in equity finds or balanced funds is out of question at such high valuations of market.So at the moment safety of my capital and a monthly income is my primary necessity.
I thought KTDFC gives a Government Guarantee for principle as well as interest and also a high interest rate. What is the risk here? Is it possible that Govt of Kerala may defer payments or something in case of default ? Pls clarify.

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Sreekanth Staff answered 9 years ago

Hi, Considering your objective(s) and profile, you may consider investing in the said Co FDs. As KTDFC / TNPF are respective State Govt undertakings, chances of default can be very low. However, kindly do not put entire lump sum amount in one Deposit scheme. You may have a look at Govt of India 8% Bonds.

The bonds will have a maturity of six years, carrying an interest at 8% per annum. Interest on non-cumulative bonds will be payable at half-yearly intervals. Interest on cumulative bonds will be compounded with halfyearly rests and will be payable on maturity along with the principal. The cumulative value of ` 1,000 at the end of six years will be ` 1,601

Other options can be - non-cumulative Secured NCDs (in any future NCD issues), Post office MIS Scheme etc. Kindly read : https://www.relakhs.com/best-company-fixed-deposits-fd-schemes/ https://www.relakhs.com/best-ncd-debentures-bonds-issue/ https://www.relakhs.com/latest-ncd-issues-2016-2017/ Kindly note that at one point of time (as mentioned by you) you got to take risk to get inflation adjusted positive real rate of returns from your investments.

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seema answered 9 years ago

Thanks Shri. But in GoI bonds and Non cumulative secured NCDs,I shall have liquidity problem , when I need to transfer my capital to equity funds at the right time. Even in KTDC, I have to inform one month in advance if I want to withdraw, and after that how much more time they may actually take to release the money is also not known. Have you gone through the profile of Suryoday Bank. I will not have liquidity problem here. They said they are going to list in Stock Market also in two years. At least for two years, will this be a good option?

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Sreekanth Staff answered 9 years ago

Hi, Lack of Liquidity is an important factor. But do note that NCDs are generally listed on Stock exchanges and can be redeemed in secondary market, though again finding the buyers can be a challenging task.. It's a Pvt ltd small finance bank. Generally any type of bank in India are well regulated, but as we all know higher the rate of interest, higher can be the RISK factor.. 'no free lunch ..' Kindly read : https://www.relakhs.com/payments-banks-small-banks-meaning-benefits/