LIC Housing Finance Fixed Deposits-Annualized yield of 11.8%-Should we invest?
LIC Housing Finance Fixed Deposits-Yield of 11.8%-Should we invest?
Last week there was advertisement of LIC Housing Finance Fixed deposits in business standard news paper. This article is based on request from Rajeev Saxena on suggest a topic. LIC Housing Finance FD schemes are not new. These are being issued to general public for the past few years. In this are article, I would provide some insights about LIC Housing Finance Fixed deposit scheme, its features and drawbacks.
Features of LIC Housing Finance FD Scheme
LIC Housing finance is a part of LIC group. It is one of the largest housing finance company which provides finance on construction and purchase of houses and flats to consumers. LIC housing finance is issuing fixed deposits from 2007 onwards. Below are its features.
- This FD scheme is available in cumulative and non cumulative options
- These FD schemes are available for 1 year, 1.5 years, 2 years, 3 years and 5 years tenure.
- Minimum deposit to be invested is Rs 10,000. Additional deposits in multiples of Rs 1,000.
- Under cumulative FD scheme, interest would be compounded half yearly and paid at maturity.
- Under non cumulative FD scheme, interest would be compounded half yearly and paid on 30-Sep and on 31-Mar.
- For Senior citizens, an additional interest rate of 0.10% for FD amount up to Rs 50,000 and 0.25% for FD amount above Rs 51,000 would be paid.
- NRI’s can apply for these FD schemes with certain conditions. The maximum period would be for 3 years and should be invested through NRO account only. Payment of interest and principal would be done to NRO account and necessary TDS would be deducted.
- TDS would be deducted as per prevailing tax laws. However such interest income is taxable based on individual tax bracket and individuals should re-compute the tax liability and pay income tax during IT Return filing.
- Premature withdrawal is available after 3 months. However one should note the following.
- No interest is payable after 3 months, but before 6 months of withdrawal from the date of deposit
- After 6 months, 2% interest rate would be reduced from actual interest rates if anyone is opting for pre-mature withdrawal
Below is the Interest rates chart.
How the company is doing in terms of financials?
The profits (after tax) and dividends in the last 4 financial years are as follows:
- 31st March ending 2010 – Profit of Rs 662 Crores – 150% dividend
- 31st March ending 2011 – Profit of Rs 974 Crores – 175% dividend
- 31st March ending 2012 – Profit of Rs 914 Crores – 180% dividend
- 31st March ending 2013 – Profit of Rs 1,023 Crores – 190% dividend
How to apply for LIC Housing Finance FD Scheme
- Download and fill up the application (LICHFL FD Scheme application form link)
- Prepare cheque favoring “LIC Housing Finance Limited-Public Deposit A/c”
- Deposit the application and cheque at any place where LIC Housing finance offices are there.
- If you are first time depositor, you should attach any of the documents like PAN Card, Election identity card, passport or ration card etc. Company would do the KYC compliance process.
Why to invest?
- LIC HFL is good dividend paying company in the last 4 years.
- Attractive yield of 11.8% for 60 months FD Scheme.
- Crisil rated this FD scheme as Crisil FAAA/Stable which indicates highest safety.
Why not to invest?
- Company FD schemes are always risky. The past performance of company may or may not reflect the future performance of the company.
- There are other good rated companies like HDFC FD schemes which too come with similar interest rates and credit ratings from Crisil.
Conclusion: LIC Housing FD Schemes has good credit rating. However interest rate looks normal. If one wants to invest in LIC Housing FD Schemes, they can invest part of their portfolio and diversify by investing in multiple companies FD schemes to reduce the risk.
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LIC Housing Finance Fixed Deposits
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