Understanding HDFC Systematic Savings Plan:

As name Systematic Saving Plan (SSP) indicates its a monthly saving plan offered by HDFC  (not HDFC Bank) where one can save minimum from Rs.2000/- and accumulate a larger capital for future.

Key Features:

• Min saving: Rs.2000/- per month.
• Period: 24 Months – 60 Months.
• Installments by ECS or auto-debit.
• Credit rating:”AAA” consecutively over decades by ICRA and CRISIL.

How to apply for SSP:

HDFC is a financial institution,not bank so one need not to have a saving account with them.

Just there is an application form for SSP.Investor needs to submit this duly completed application form,KYC documents (Self attested copies of address proof,pan card),cheque of first installment,ECS (Auto debit) mandate for the subsequent installments.

How this plan is different from Recurring Deposits Of The Banks:

There is a key difference between recurring deposits offered by banks and that offered by HDFC.

HDFC SSP is a Variable Rate Installment Deposit Plan.i.e.interest rates will be variable and reset at the begining of every quarter and rates at the begining of the quarter will be applicable for entire quarter.In case of bank deposits interest is added quarterly basis while in HDFC SSP it is added on 31st march of every year.

Currently applicable deposit rates:

Period (Months)	Current Rates
24-35	9.25
36-59	9.50
60	9.50

Above deposit rates are since August 23,2011.

How Interest Is Calculated:

Suppose any one have started SSP on 25th Nov 2010 for period of 3 yrs when rate of interest was 7% .Suppose rates changed as following way:

Date	Rates
15-12-2010	6.75%
20-02-2011	7.25

Then for this account the interest upto 31st march 2011 will be calculated as below:

Deposit Date	Amount	Rate of Return	Upto Date	Int Amount
25-11-10	2000	7%	31-12-2010	14.19
		6.75	31-03-2011	33.75
11-12-10	2000	7%	31-12-2010	8.05
		6.75%	31-12-2011	33.75
11-01-11	2000	6.75%	31-12-2011	29.59
11-02-11	2000	6.75%	31-12-2011	18.12
11-03-11	2000	7.25%	31-12-2011	8.34
Gross Interest				145.80

One can view that when account was opened at that time interest was 7% pa then  interest vary from 6.75 to 7.25%…and accordingly the interest rates will reset for each calender quarter (Jan-Mar,Apr-June,July-Sept,Oct-Dec) and interest rate has calculated.

Interest will get credited on March, 31st of every year.

Due to variable rates,investors can get higher as well as lower rates for future installments.In above example Investor was started with 7% but today he get 9.50% interest rate, till it is revised furthur.

Premature Withdrawal:

• Not possible within first 3 months.
• No interest will be payable for exit within 3 months – 6 months.
• After 6 months,with 2% lower rates than actual.

HDFC is really smart institution.They have protected themselves from interest rate risks, but also  I think its not wrong any way..finally its in favor of the institution and in turn of investors also..isn’t it?

 

Please Note:

Variable rates only applies to Systematic savings plan.For other lumpsum deposits of HDFC rate will be fixed for complete tenure.