State DL of 5 year duration or FD or Short Term Debt Fund which is better?

State development loan Bond (RJ 2026) with 6.4% yield or Fixed deposit of 6.2% or short term fund with 8% expected returns.
Which is the best option in terms of considering tax as well?
Investment period - 5 years

Can you mention the name of the bank or is it any NBFC ? I want to know who offers 6.2% interest!

This is just indicative not the actual yield. you’ll get to know the actual yield after the auction.

@TradeXMaster Bajaj Finance giving 6.5% returns for 36-60 month duration. Came to know from ETMoney

couple points to ponder, for making decision:

  1. Taxation - each one is taxed differently. for direct SDL and FD, taxation at slab, for short term MF - indexation can reduce the taxes
  2. Safety - SDL would be highest rated, short term fund would vary based on holding and can be holding really bad bonds in it
  3. Predictability - Yields are fixed in 1 & 2, 3rd is just expected. If there is adverse interest rate movement (rate rises) - actual yield on short term fund could be less
  4. Liquidity - getting out of 1 & 2 would be difficult, if you need money in interim. Short term MF would be easier to liquidate (assuming Franklin like scenario does not happen)

Hope this helps in making decision


Thanks @Akash_Shah. Nicely differentiated and explained


Savings Bank account interest rate.
RBL offers interest rate on tired basis upto 1 lack 4.25% above 1 lack 5.75 and over 10 lacks at 6%

Equitas small finance bank offers
Up to ₹ 1 lakh 3.50%
Above ₹ 1 lakh 7.00%

Ujjivan Small finance bank
Up to 1 lakh 4.00%|
1 lack to 25L - 7%