Mahindra Finance has revised FD rates. Should you invest?

Mahindra Finance, a AAA rated NBFC, has revised interest rates on its fixed deposits (FDs) from September 19.

Under its Samruddhi deposit scheme (for deposit up to ₹5 crore), the company offers 8.05 per cent per annum for a tenure of 3-5 years for depositors below the age of 60 years and additional 0.25 per cent for senior citizens (above 60). Thus, the maximum interest applicable for senior citizen depositors will be 8.3 per cent per annum. In addition to these, employees of Mahindra group (serving/retired) will be eligible for additional 0.35 per cent interest on Samruddhi scheme.

The minimum deposit amount is ₹5,000 and additional amount should be in multiples of ₹1,000. The company also offers non-cumulative deposits where depositor gets interest at half-yearly, quarterly, or monthly intervals. The date for interest payment will be as follows: for half yearly payouts on 30th September and 31st March, for quarterly payouts on 30th June, 30th September, 31st December, and 31st March, for yearly payout on 31st March and for monthly payouts, on the last working day of the month.

Other AAA rated NBFCs, like Bajaj Finance, offer 7.55 per cent for 24 months, 7.35 per cent for 25-35 months, and 8.05 per cent for 36-60 months. Senior citizens are eligible for 25 basis points over these rates. Bajaj Finance also offers a special deposit for 44 months where it offers 8.35 per cent for regular depositors. Sundaram Finance, another AAA rated NBFC, offers 7.75 per cent for non-senior citizens for tenures of 3 years and above and 50 basis points higher for senior citizens.

In the banking space, few Small Finance Banks (SFBs) offer higher rates. SFBs like Equitas SFB, Suryoday SFB, and Fincare SFB offer around 8.25-8.6 per cent per annum for non-senior citizens and additional 25-50 basis points for senior citizens. In addition to it SFBs have DICGC cover of ₹5 lakhs which NBFCs do not have.

Other details

The FD in Mahindra Finance can be started in both online and offline methods. Depositors can visit the site of Mahindra Finance and start FD by providing KYC details and transferring the amount. Depositors are eligible to avail a loan of up to 75 per cent of the deposit amount which has been deposited for at least three months. The interest applicable on such loan would be 2 per cent more than the interest on the deposit.

Mahindra Finance, however, charges a penalty for premature withdrawal. No premature withdrawal is allowed within the first 3 months of making deposit and in case of withdrawal between 3-6 months after making deposit, only principal will be repaid. In case the deposit is closed after 6 months and before maturity, the interest rate payable shall be 2 per cent lower than the interest applicable for the period.

Financials

The revenue of the company grew 25 per cent in Q1FY24 YoY to ₹312.5 crore and profits, by 58 per cent to ₹353 crore. The gross NPA in Q1FY24 was 4.4 per cent and the net NPA was 1.8 per cent against 8 per cent and 3.5 per cent gross and net NPA in Q1FY23.

The capital adequacy ratio stood at 21.2 per cent in June 2023.

What should investors do?

Although some banks, especially SFBs, may offer higher rates than Mahindra Finance, the rates compare favourably with its peer NBFCs in regular deposits and is a AAA rated firm. Currently, the interest rates are close to peak and going forward there are many variables which will decide rate trajectory. It would therefore be wise to lock-in for the medium-term now. Therefore, investors who already have exposure to SFB deposits and other AAA rated NBFCs can consider parking their surplus funds for 3-to-5-year tenure at Mahindra Finance, for diversification purposes.