Investment Focus - M&M Finance FD: Invest :: Business Line

These are troubled times for India’s equity and debt markets. Slowing economic growth and a freefall in the value of the rupee vis-à-vis the US dollar, besides other major global currencies, are among the chief reasons for this state of affairs. With most asset classes under pressure to perform in such a scenario, one relatively safe investment option stands out -- fixed deposits.

HIGH SAFETY

Mahindra and Mahindra Financial Services (MMFSL) a leading non-banking financial services company, predominantly engaged in automobile financing, offers attractive rates on its two- and three-year fixed deposit schemes.

The company’s FD has been rated FAAA by CRISIL. This assures the highest level of safety for your principal and interest receivable. So, the chance of you losing your principal or interest is the least. The minimum amount you may have to invest under this scheme is Rs 10,000.

ATTRACTIVE RETURNS

MMFSL offers 10 per cent interest annually on the money you invest under the cumulative option for a 24-month period. If you are looking to invest your surplus funds over a longer time horizon, you can go for the three-year option. The company offers 10.25 per cent annually under the cumulative option for a three-year period.

If you are a senior citizen, who has completed 60 years of age, you are eligible to receive an additional 0.25 per cent as interest.

This is much higher than the interest rate offered by other FD schemes with a comparable rating. For instance, Sundaram Finance with an MAAA rating by ICRA, which also denotes highest safety, offers 9.5 per cent interest annually on its two- and three-year deposits. Senior citizens are entitled to an additional 0.5 per cent. MMFSL’s FD, despite being rated at par with Sundaram Finance’s FD in terms of the safety of the principal, offers 0.5 per cent more for the depositors. The tax treatment is similar to other FD schemes.

Interest income beyond Rs 10,000 will attract a TDS of 10 per cent if you fail to provide a 15G/15H declaration stating that your interest income is within the exemption limits.

Having started as an exclusive financier for M&M’s vehicles in 1993, it has gradually diversified into vehicles of other manufacturers. In the last two decades, the company has also reduced dependency on commercial vehicles and tractors by foraying into utility vehicles, cars and construction equipment.

With an improvement in the business fundamentals, it has managed to improve its asset quality significantly over the last four years. Its gross non-performing assets, (the measure of the quantum of bad loans), have improved from 6.4 per cent to 3 per cent. MMFSL’s disbursement grew 31.8 per cent in the June quarter. The net interest margin stood at 8.6 per cent for the quarter.

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