The Reserve Bank of India has hit the pause button on interest rates, after a 250-basis point hike in the last one year or so. But after a brief lull, the Federal Reserve and the European Central Bank increased interest rates last week. Despite inflation generally being on the decline, there is no sign of interest rates coming down for the foreseeable future. Thus, it may be a good time to lock into attractive interest rates on deposits of quality banks and NBFCs, for the medium term.

Mahindra & Mahindra Financial Services Ltd (MMFSL) is offering deposits across tenors of up to 50 months and the rates are reasonably healthy, more so for senior citizens.

Here’s more on MMFSL’s deposits and why investors must lock into better rates now.

Robust interest rates

MMFSL offers deposits starting from 12 months and going all the way up to 60 months. However, it is only on deposits of 36 months and above that the rates exceed 8 per cent for the general public. For senior citizens, however, even the 24-month deposit offers 8 per cent.

Now, the interest offered on all tenors – 36, 42, 48 and 60 months – is 8.05 per cent for regular deposits, if the cumulative or annual interest payout options are taken. For senior citizens, the interest rates on these deposits are 25 basis points higher and so they would get 8.3 per cent.

There are monthly, quarterly, half-yearly, annual and cumulative interest payout options for investors. Those requiring regular cash flows can opt for the annual interest payout option as the interest rates are the maximum in that option for general and senior citizens.

The minimum investment if you choose the cumulative option is ₹5,000, while it is ₹25,000 if you want to take annual interest payouts. Investors can opt for the 36 month-42-month tenors if they don’t wish to stay locked in a deposit for any longer.

MMFSL’s deposits have the highest AAA/Stable rating from CRISIL and IND rating agencies. Therefore these are deposits that carry the maximum safety on interest rate and principal repayments. The rates on offer compare favourably with other AAA-rated NBFCs.

Company on growth path

MMFSL is an NBFC that finances purchase of auto/utility vehicles, tractors, cars, commercial vehicles and construction equipment and pre-owned vehicles, among a few other segments. It is a pan-India player with presence across all regions in the country.

After the Covid years of 2020-2021, which were challenging for lenders across the board, the company is back in growth mode over the past fiscal or so.

  • The disbursement in FY23 was ₹49,541 crore, a healthy 80 per cent increase over FY22.
  • Profit after tax rose 101 per cent over FY22 to ₹1,984 crore in FY23.
  • Loan book increased by 31.4 per cent in FY23 over FY22, to ₹79,455 crore.
  • Return on assets rose to 2.3 per cent in FY23 versus 1.3 per cent in FY22.
  • In FY23, Gross stage-3 assets – those overdue beyond 90 days – stood at 4.49 per cent (FY22: 7.66 per cent) and the net stage 3 assets stood at 1.87 per cent (FY22:3.36 per cent). There has been a significant improvement in asset quality in FY23.
  • Provision coverage ratio has improved from 58.1 per cent in FY22 to 59.5 per cent in FY23.
  • The NIM (net interest margin) in FY23 was stable and healthy at 7.6 per cent
  • Capital adequacy is reasonably strong at 22.5 per cent as of March 2023.

Although the company would want to reduce its gross and net NPA (non-performing assets) a bit more, the trajectory of overall growth and asset quality is healthy.

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