LIC Housing Finance FD Rates: Better Choice for NRIs?

Here's what caught my attention when analyzing LIC Housing Finance's "Sanchay" deposit scheme: While most banks struggle to cross 6-6.6%, LIC consistently offers 6.70% returns. 

But there's a catch most NRIs miss – and an opportunity that could save you lakhs in taxes.

6.70% – The highest FD rate in India from a CRISIL AAA-rated housing finance company

₹23,000+ crores – Approximate total deposits as of March 2025 (based on latest financials; exact figure from Q4 FY25 disbursements and assets indicate growth). (Source)

5-year lock-in – Maximum tenure for the highest returns (NRIs limited to 3 years, so no 80C for NRIs).

75% – Loan facility available against your FD for emergency liquidity

Summary: LIC Housing Finance offers India's most competitive FD rates at 6.70% for 5-year tenure, backed by CRISIL AAA rating and DICGC insurance. Perfect for NRIs seeking higher returns than traditional banks with proven safety record.

Let me share what happened with Priya, an Abu Dhabi-based software architect. 

She was comparing FD rates across banks when she discovered LIC Housing Finance. "I almost ignored it thinking it's just another housing finance company. 

Turns out, their 6.70% rate beat every bank I checked, and the CRISIL AAA rating convinced me it's safer than most private banks."

Six months later, she's earning ≈₹33,500 annually on her ₹5 lakh deposit, compared to ₹32,500 she would have earned with her bank's 6.5% rate.

(Source: LIC Housing)

Why NRIs Are Choosing LIC Over Traditional Banks

The Rate Advantage is Real

Most NRIs automatically think banks when considering fixed deposits. But housing finance companies like LIC HFL often offer significantly higher rates while maintaining similar safety standards.

Current Market Comparison (September 2025)

The difference adds up. On a ₹10 lakh investment for 3 years:

• LIC Housing Finance (6.65%): ≈₹2,09,000 interest
• Average bank FD (6.50%): ≈₹2,05,000 interest
• Additional earnings: ≈₹4,000
• Source: LIC SBI ICICI HDFC Axis

👉 Tip: LIC Housing Finance's Dubai office makes it especially convenient for UAE-based NRIs to handle documentation and queries.

Safety That Matches the Returns

CRISIL AAA Rating: This indicates the highest degree of safety regarding timely payment of interest and principal. Only the most financially stable institutions receive this rating.

DICGC Insurance: Up to ₹5 lakh per depositor is protected under the Deposit Insurance scheme, same as bank FDs.

Proven Track Record: Operating since 1989, LIC HFL is one of India's largest housing finance companies with over 25 lakh customers.

LIC Backing: Sponsored by Life Insurance Corporation of India, providing additional institutional credibility.

How It Works

Understanding the Sanchay Scheme

LIC Housing Finance offers fixed deposits under the "Sanchay" (meaning savings) scheme with two main options:

1. Cumulative Deposit

• Interest compounded annually and paid at maturity
• Higher effective returns due to compounding
• Minimum: ₹20,000, then multiples of ₹1,000
• Best for: Long-term wealth accumulation

2. Non-Cumulative Deposit

• Regular interest payouts (monthly or annually)
• Lower rates than cumulative but provides regular income
• Monthly option minimum: ₹2 lakh
• Annual option minimum: ₹20,000
• Best for: Regular income seekers

Current LIC FD Interest Rates (September 2025)

Cumulative Deposit Rates

Non-Cumulative Deposit Rates

Special Benefits for Senior Citizens

• Additional 0.25% across all tenures
• Valid age proof required at the time of application

Pros for Gulf-Based NRIs

Why LIC FD Makes Sense for UAE Residents

Higher returns than UAE banks: Current UAE FD rates hover around 2-4%, making LIC's 6.70% extremely attractive.

Currency arbitrage opportunity: With favorable USD to INR conversion rates, your investment buying power increases significantly.

Indian tax efficiency: NRI taxation rules allow strategic planning, especially with DTAA benefits for UAE residents.

Loan facility: Unlike most international FDs, LIC offers loans up to 75% of your deposit value at just 2% above the FD rate. This provides emergency liquidity without breaking the FD.

Unique Advantages vs. Bank FDs

No monthly balance requirements: Unlike NRE savings accounts with high minimum balances, LIC FDs have a one-time minimum of ₹20,000.

Flexible nominations: Up to 3 joint holders allowed, making estate planning easier for NRI families.

Auto-renewal facility: Your FD automatically renews at prevailing rates, ensuring you don't miss out due to busy schedules abroad.

Dubai office connectivity: Being present in Dubai, LIC understands NRI pain points better than purely domestic institutions.

Risks and Limitations

What You Must Know Before Investing

NRI tenure restriction: While residents can invest for up to 5 years, NRIs are currently limited to 3-year maximum tenure. This means you miss the highest 5-year rates.

Housing finance company risk: Though CRISIL AAA-rated, housing finance companies face different regulatory oversight than banks. However, the track record and LIC backing mitigate this significantly.

Premature withdrawal penalties:

• No interest if withdrawn within 3 months
• 3% flat rate if withdrawn between 3-6 months
• 1% reduction from applicable rate if withdrawn after 6 months but before maturity

TDS implications: 10% TDS deducted if annual interest exceeds ₹50,000 (₹50,000 for senior citizens). Without PAN, TDS increases to 20%. (source)

Also Read - DTAA for NRI Bank Interest: Can You Avoid 30% TDS Legally

Limited digital infrastructure: Unlike major banks, LIC HFL's digital banking platform isn't as advanced. Most transactions require branch visits or phone banking.

Liquidity Constraints

Unlike bank FDs where premature withdrawal is easier, LIC Housing Finance premature withdrawal is "at the sole discretion of the company." While they generally allow it with penalties, it's not guaranteed as a right.

Better approach: Use LIC FDs for longer-term parking and maintain emergency funds in more liquid instruments.

Step-by-Step How-To

Opening Your LIC Housing Finance FD

Step 1: Eligibility Verification

NRIs can invest through:

• Resident Individuals
• Non-Resident Indians (for 3-year tenure)
• Hindu Undivided Families (HUFs)
• Partnership firms
• Cooperative societies

Also Read - Residential Status Under Section 6 Of Income Tax Act

Step 2: Documentation Requirements

For NRI Investors:

• Valid Indian passport
• Overseas residence permit/visa
• Overseas address proof (bank statement, utility bill)
• PAN card (mandatory for tax compliance)
• Recent passport-size photographs
• NRE/NRO account details (if existing)

Step 3: Choose Your Investment Route

Option A: Dubai Office Visit LIC Housing Finance has a representative office in Dubai. This is the most convenient option for UAE-based NRIs for documentation and guidance.

Option B: Online Application Visit www.lichousing.com and complete the online application. You'll need to courier documents for verification.

Option C: Indian Branch If visiting India, visit any LIC Housing Finance branch with required documents.

Step 4: Fund Transfer

For NRIs:

• SWIFT transfer from overseas account
• Transfer from existing NRE/NRO accounts
• Foreign currency demand draft

Step 5: FD Booking Confirmation Once funds are received and documents verified, you'll receive:

• FD receipt with terms and conditions
• Maturity instructions
• Nominee details confirmation

👉 Tip: Book your FD immediately after fund transfer to lock in current rates. LIC rates are subject to change without notice.

Maximizing Your LIC FD Strategy

The 3-Year Ladder Approach

Since NRIs are limited to 3-year tenure, create a laddered portfolio:

Year 1: ₹3 lakh in 3-year FD (7.75%)
Year 2: ₹3 lakh in 3-year FD (rates prevailing then)
Year 3: ₹3 lakh in 3-year FD (rates prevailing then)

Result: Annual liquidity from Year 4 onwards while maintaining high-yield exposure.

Tax Optimization Strategy

If you're an Indian tax resident:

• Use 5-year FDs (if you can invest as resident) for Section 80C benefits
• Spread investments across financial years to optimize tax deductions
• Consider rental income taxation implications if you have Indian property income

Also Read - Best NRI Fixed Deposit Accounts India Complete Tax & Rate Guide

Action Plan

LIC Housing Finance FDs represent one of the best risk-adjusted returns available to NRIs today. The combination of 6.70% returns, CRISIL AAA safety rating, and institutional backing makes it a compelling alternative to traditional bank FDs.

For most UAE-based NRIs, here's the optimal approach:

• 30-40% in LIC Housing Finance FDs for maximum INR returns
• 30-40% in GIFT City USD FDs for currency protection
• 20-30% in traditional bank FDs for liquidity and banking relationship

Have questions about LIC FDs or other investment strategies?

Join our WhatsApp community where fellow NRIs share experiences and get expert guidance on maximizing returns safely.

Sources: LIC Housing Finance Official Website PaisaBazaar LIC FD Analysis BankBazaar LIC Rates Scripbox LIC FD Guide LIC Deposit Interest Rate Security Investments.in