Leading housing finance major, HDFC, has decided to make interest rate on recurring deposits variable. This move is meant to attract long-term deposits and averting premature withdrawal when interest rates go up. For this, HDFC has introduced a systemic savings plan (SSP) scheme, under which it will examine and alter interest rates on deposits every quarter.
The depositors should invest at least Rs 2,000 up to Rs 50,000 every month. In this scheme, the rate will be 7% for 24-35 months, 7.25% for 36-59 months and 7.75% for 60 months, according to the current rates.
An HDFC spokesperson said that both the new as well as old SSP depositors will get the same rate of interest for the corresponding tenure. The aim of this scheme is to prevent any despair among depositors when the interest rates go up, as well as avert premature withdrawals, which is quite common when the rates go up.
HDFC said that HDFC SSP is free from the volatility of the capital market and with feature of variable interest rate, the depositor benefits from higher rate, when the interest rates are hiked. The scheme also offers ECS (debit clearing) facility, thus making it convenient for everybody.