Get better returns than FDs (Fixed Deposits) – RBI Retail Direct

Nope, this isn’t a sponsored post or crypto scam I’m shilling. For the first time in 7 years I’m not adding to savings, I’m instead drawing on them. When you have a job, you get money every month! When you’re building a startup – you don’t. But you’re still spending…

Even though I’ve prepared for this by saving over the years, it doesn’t feel great to see account balances go down. It’s kind of an inevitable part of the startup journey though. So for some monthly expenses, I’m trying to match them with fixed income instruments – things that pay interest.

As an example, a fixed deposit that has enough of an interest rate to cover my phone and internet bills. [Bills, INR 2000 / Month | FD Pays 6.25% per year | Amount required in FD to cover the bill, x = (2000 X 12) / .0625 = INR 3,84,000.]

Short term FDs are extremely tax inefficient so I’ve never paid much attention to them. If you hold any debt instrument for less than 3 years, it gets added to your total income and taxed at whatever your income tax slab is. That means in the 30% tax bracket (plus the 4% health and education cess the government takes), the interest you get becomes 4.3% instead of 6.25%. That’s why, any debt instrument I’ve bought has been for longer than 3 years – where the Long Term Capital Gains (LTCG) gets taxed at 20% (with the benefit of indexation, which reduces your gains by the amount of inflation so you pay lesser tax – talk to your CA / Tax advisor 😋). Debt instruments are a boring area, so I’d never looked at the options – it was bank FDs or debt funds on Zerodha Coin / Kuvera type platforms – until this week.

I’ve found out about an instrument that pays more than bank FDs and has zero risk! It’s backed by the Reserve Bank of India, so it’s as secure as any Indian instrument can be (Economics note: central banks don’t default on debt in their own currency because they can just print it, if they’re on the verge of default, we’ll have bigger problems than my small personal savings).

It’s Treasury Bills, also called Government / Sovereign Bonds! Surprisingly, I didn’t know we could buy it for as little as INR 10,000 / USD 125, in maturities (duration of your money being locked in) as little a 91 days!

You can go to RBI Retail Direct, the account creation with PAN and Aadhaar took less than an hour and got approved within a day, and you can buy it directly from the Reserve Bank.

As of today (10 Nov 22), the 91 Day TBill yields 6.47%, the 364 Day TBill yields 6.98% and the 1-2 year is at a little over 7%. The ones longer than this duration are at about 7.4% right now. Check all the rates here. This is a little better than my bank’s rates at 6% for 364 days and 6.3% for longer than an year – Kotak Mahindra Bank.

PS: You can get a decent bit more in corporate bonds, 9-10% – but these have long maturities and come with the risk of the company defaulting. I’m trying to build a startup here, not become a bond investor, so sticking with 1 year GSecs makes a lot of sense to me. Just thought I’d share because most of us have barely gotten any financial literacy in our years of schooling and this seems to be an interesting find!

In a similar vein, if you don’t know about them you should look up Sovereign Gold Bonds – again issued by the RBI and guaranteed by the government, the bonds give you whatever the price of gold is on maturity. Best part: it gives you a 2.5% interest in the meantime – paid out in two parts every year. To me, it seems better than physical gold in all respects – no margin that jewellers charge (on both selling and buying gold coins), it gives you interest which physical gold doesn’t, no storage risks, and you benefit India by not adding to the import bill!

Moving on…

Program Update

Update from Antler after two interviews – just been called for the third (and likely final) one with a Director. I’ve now also done an interview with Entrepreneur First! (context in the week 3 update) It was a super interesting call at EF was with Rahul Samat, the GM and Partner of EF Bangalore who was kind enough to reschedule after I missed the first call! [Note to self: don’t apply with emails not synced to the iOS calendar!]

The EF call went super well, and there are some exciting updates coming on this front! More on this in the next week’s email after I make sure what I’m allowed to talk about.

You’re an A – or a B!

Many of you would have gotten last week’s email much later than usual. It was an A/B test. That means I randomly selected people and divided them into two groups.

Group 1 got an email with the subject “Week 5: Choosing tools and deciding on an MVP”, the other half got an email with the subject line “Week 5: How do you even start to build a multimillion dollar tech startup”. The idea was to see if a direct title worked better or a clickbaity one. The results are clear – the direct heading won! No wonder “How to Win an Indian Election” was a bestselling title.

As an inadvertent experiment, I also ended up sending most of you an email later than usual because I was waiting for the A/B test results to come in. That means 70% of the emails were delayed from the usual 8ish AM to between 12:10 PM and 1:00 PM. This led to a >10% fall in email open rates! (Dropped from about 50% in prior weeks to 37.8% last week). Clearly, early emails are better!

PS: I’m a huge believer in A/B tests and trusting the results. We decided a lot of political campaign strategies and messages this way. Within the 2-3 months, I’ll randomly try a different day for sending these emails and compare it to the Friday open rates. It’s fascinating data and you never know when the insights will come in handy!

About BehindTheBuild:

I’m a bestselling author, campaign consultant and data analyst working on building a startup, and documenting the entire journey at BehindTheBuild. The BTB newsletter is your inside view into the building and scaling up of a startup from zero to millions. The idea is to show how a multi-million dollar startup can be built without the need for much financial resources, and from anywhere in the world. If you’re interested in startups, entrepreneurship, testing ideas and running ventures, please do subscribe to the weekly newsletter (sent out every Friday):