HDFC Systematic Savings Plan’ (HDFC SSP) is a monthly savings plan launched by the Housing Development Finance Corporation (HDFC Ltd.) offering medium to long-term instalment options.

The plan offers medium to long-term instalment options where the depositor can choose any period between 24 and 60 months and monthly instalment amount can range from Rs 2,000 to Rs 50,000. The specified monthly savings amount will automatically be transferred from the account holder’s bank account to the SSP account on a preset date.

This savings plan offers the option of a variable interest rate which is linked to the bank’s benchmark rate. This variable interest rate will be revised at the beginning of each calendar quarter. The interest will be accrued and credited on March 31st every year. The Tax deducted at Source (TDS) will be as under Section 194A of the Income Tax Act, 1961

Interest Rates on HDFC SSP

Deposit Tenure (in months)	Interest Rate per annum
24-35	7%
36-59	7.25%
60	7.75%

Premature withdrawal may be permitted at the discretion of the Corporation which will be subject to the Housing Finance Companies, National Housing Bank Directions, 2001, as applicable from time to time. While no withdrawal is permitted within 3 months of opening the account, a different set of interest rates will apply on premature withdrawal day after.

Interest Rates on HDFC SSP Premature Withdrawal

Months completed from date of deposit	Interest Rate payable
After 3 months but before six months	No interest
After 6 months but before maturity date	Interest payable will be 2% lower than rate applicable for which deposit account has run. If no rate has been specified for the period, then 3% lower than the minimum rate at which public deposits are accepted by HDFC.

The duly discharged deposit receipt has to be surrendered to HDFC about a week in advance from the date of maturity for renewal or repayment of deposit. The Nomination Facility is available to individuals, singly or jointly. But, only a single person can be nominated. In case the deposit is in the name of a minor, the nomination can be made only by the legal guardian..The nominee shall have the right to receive the amount due in respect to the deposit.

Investors of HDFC SSP may stand to gain assured returns over a 2-5 year horizon. The plan is available from February 3, 2010 to Resident Indians in cities that have the Electronic Clearing System (ECS) centres. The centres are in the 4 metros and other cities such as Pune, Ahmedabad, Kochi and Hyderabad. Currently, there are centres across 21 cities.

We at Personal FN believe that with the expectations that inflation is set to rise in the near future, will put pressure on interest rates to move north. Given this, many depositors are investing money for a short tenure hoping that they would invest in long term schemes when interest rates increase. The offer of variable interest rates will also prevent premature withdrawals.

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