Aadhar Housing Finance NCD Offer Better Than Bank FD?

Aadhar Housing Finance NCD with attractive interest rate or Bank FD backed by conventional features what would millennial generation prefer. Lets have a look

DHFL group, Aadhar Housing Finance is soon venturing into NCD subscription that would offer a high interest rate to the citizens. The non- convertible debentures are secured and are open for the subscription, but should the investor invest in it or is traditional mode of investment FD is a much better option in this scenario where you never know which company can go bankrupt.

Aadhar Housing Finance NCD or Bank FD?

The traditional method of investment continues to be in trend for many years from now, but what if someone says that we can offer you an attractive interest of more than 9% with other lucrative features, well Aadhar Housing Finance NCD is about the same. So, in the next few lines, we will discuss who wins the race.

In case you want to participate or purchase the NCD offered by the company having a demat account is mandatory which is not required in the  bank FD. Further, you need to purchase 10 NCD or need to at least invest Rs 10,000 in this but the minimum amount for bank FD may vary Rs 1000- Rs 10,000, which means anyone can participate in it.

The maturity or withdrawal of NCD is 3 years, while the lock in period for FD could be 1 year or 5 years, depending upon the purpose of the investment.

Interest rate Compared

NCD is a fixed return investment scheme with a differential interest rate that will attract a majority of the investors. For an investment of Rs 1000 the investor will fetch amount of Rs 1316.85, which equals to an interest rate of 9.6% (the coupon interest rate may vary from 9.25% to 9.75%), but in case of bank FD the depositor wouldn’t get return more than 7.25%, which is a quite a big difference.

The interest is paid on NCD on the monthly and yearly basis and in FD the interest is paid on the monthly and quarterly basis.

NRI is not allowed to invest in NCD, but in FD they can invest through NRE fixed deposit account.

Interest on NCD is not at all taxable at the slab rate. No TDS will be deducted for the securities listed on the stock exchange, but TDS is applicable on FD.

Should you invest in NCD?

Well, with so many features including security, the primary question is should the investor in it or not, well there are both pros and cons of investing in it.

The company has a good track record and is backed by Central Government Housing for all initiative and is earning consistent returns and is offering investor high- interest rate, but at the same time the business is subject to market volatility and is not as safe as bank FD.

The company is new and there are chances that it may get inhabited by the debts, operating expenses, etc. The company needs to maintain minimum adequacy ratio to sustain in the market and any such default would have an adverse effect on its profitability. Investing in Aadhar Housing Finance NCD is similar to the mutual fund investments.