In the past year rates on fixed-income instruments grew steadily. This was due to the continuous rate hike by RBI, but now RBI has paused the rate hike as inflation has started to moderate. Therefore, it can be said that the interest rates being offered have plateaued. It can, therefore, be prudent to think of making fixed-income investments and lock in at good rates. LIC Housing Finance is one NBFC giving attractive rates for deposits.
All about LIC Housing’s FD
LIC Housing Finance increased the rate being offered from April 12, 2023 by 25 basis points, which is 7.75 per cent for a tenure of 3-5 years. It offers an additional 0.25 per cent interest across tenures to senior citizens, which means the maximum interest rate they can get is 8 per cent per annum for 3-5 years tenure. The deposits here are offered as cumulative and non-cumulative. The company offers monthly and yearly payout under non-cumulative deposits.
LIC Housing Finance is a prominent housing Finance company backed by the Insurance giant LIC and therefore can be safely relied upon. The minimum amount to start an FD is ₹20,000. However, investors willing to opt for monthly payout option will have to deposit a minimum of ₹2,00,000.
LIC Housing Finance is among the firms which offer high rates in the NBFC space. Bajaj Finance and Sundaram Finance are two players which offer 8.05 per cent and 7.75-7.9 per cent respectively for the same tenure.
Pros & Cons
Fixed deposits are liquid in nature and therefore can be withdrawn whenever required after the lock-in period of 3 months. The company also offers loans against deposits where depositors can avail up to 75 per cent of the deposit value as a loan. The interest rate on such a loan against FD will be 2 per cent higher than the rate of interest being offered. The company has CRISIL AAA/STABLE ratings, which implies the going concern nature of the business and lesser default risk.
The lock-in period for the deposit in LIC Housing Finance is 3 months. If the deposit is being withdrawn after 3 months but before 6 months, then only 3 per cent will be paid as interest to an individual investor and no interest will be paid to other categories of depositors. However, if the deposit is being withdrawn after 6 months of deposit but before the maturity date then the interest payable will be 1 per cent lower than the applicable rate.
LIC Housing Finance has good financials in addition to attractive rates which it offers. The Net Interest income of the company in March 2023 quarter was ₹1,990.3 crore, which is 22 per cent higher YoY. The revenue grew 21.05 per cent in Q4FY23 YoY to ₹6,415 crore. The Net Interest margin for Q4FY23 was 2.93 per cent against 2.64 per cent in Q4FY22. The Gross and Net NPAs in FY23 were 4.49 per cent and 2.7 per cent, respectively, against 5.35 per cent and 3.72 per cent.