Gruh Finance FD Scheme-Can we invest?
Gruh Finance Ltd which is joint venture of HDFC Ltd and AKFED has launched Fixed deposit (FD) schemes in 1st week of August, 2013. Crisil rated this FD scheme as FAAA and ICRA rated this scheme as ICRA. In this article, I would discuss about Gruh Finance FD scheme, its features, whether one can invest or not.
About Gruh Finance Ltd
In 1986, HDFC and AKFED formed Gruh Finance Ltd. Gruh Finance provides housing finance in rural and semi urban areas. Gruh Finance FD schemes are issued for 15 months, 18 months, 21 months, 30 months and 33 months. Though it issued other FD schemes earlier, these 5 short term tenure FD schemes have been launched only now. Since these are short term tenure FD schemes, it has attracted investors.
Gruh Finance Ltd financials
- Gruh Finance net interest has grown from Rs 85 Crores (FY 2008-09) to Rs 218 Crores (FY 2012-13).
- Profits has grown from Rs 50 Crores (FY 2008-09) to Rs 146 Crores (FY 2012-13).
- Company has been paying good dividend and paid dividend of 125% in FY 2012-13.
Features of Gruh Finance FD scheme
- Gruf Finance FD scheme is available in Cumulative scheme and non cumulative scheme. Under non cumulative scheme, it comes with 3 options like MIP (Monthly income plan), Quarterly income and Annual income plans.
- GRUH is a recognized Housing Finance Company by NHB.
- Trust Deposit placed with GRUH qualify under the category of specified investment as defined under section 11 (5)(ix) of the income Tax Act, 1961.
- No TDS on interest on deposit up to Rs.5000/- per financial year. However income tax is applicable based on individual income tax slab.
- Loan against individual deposits as per NHB guidelines.
- ECS facility available for payment of interest on non-cumulative deposits.
- Advance Interest warrants for one financial year.
- Premature withdrawal facility as per existing NHB directives.
- Exempted from Wealth Tax.
- Nomination facility available
- 0.25% additional Interest Rates (p.a) for Senior Citizen above 60 years
Interest chart is shown below
Who Can Apply : Fixed Deposit can be placed by Resident Indians/Trusts/Minors through Guardians/Association of Persons/HUF/Proprietory Concerns and Partnership firms.
How to apply for Gruh Finance FD Scheme
You can apply through any of the HDFC or its subsidiaries or through any brokers like ICICI Direct, Fundsindia.com etc. Application forms are available with them.
Why to invest?
- Company generating good profits and paying high dividends.
- Interest rates are comparable with bank FD’s.
- No TDS up to Rs 5,000 interest. However interest need to be paid by individuals based on their income tax slab.
- Short term tenure FD’s
Why not to invest
- FD’s are illiquid. Premature withdrawal is offered in this FD scheme. However you can withdraw after 3 months. Up to 6 months no interest would be paid. After 6 months till maturity, one can withdraw the FD. However they would get 2% less than actual interest rate pertaining to that period.
- Company FD repayments of principal + interest would depend on the performance of company and there could be delay.
- For high tax bracket individuals, post tax returns would be low.
Conclusion: I am not excited about this Gruh Finance FD Scheme. The interest rates are comparable with bank FD rates. One need not take risk and invest in such company FD schemes. You can invest in a bank FD scheme getting similar interest rates where you would also get insurance on your deposit up to Rs 1 lakh.
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Gruh Finance FD Scheme