New monthly deposit plan with floating rates by HDFC

New monthly deposit plan with floating rates by HDFCIndia's largest housing finance company, HDFC has come out with a monthly deposit plan which offers a floating rate of interest for its customers. The rate of interest in the country is expected to go up in the coming months.

The scheme known as 'HDFC Systematic Savings Plan' will be first of its kind for the bank. The interest rate of the scheme will be linked to the benchmark rate and will be reviewed at the beginning of each calendar quarter.

Under the plan the customers can select any period between 24 and 60 months to deposit a fixed monthly amount in order to collect large savings. The monthly installment can range from Rs. 2000 to Rs. 50,000.

The plan is to come into effect from February 3, 2010 to all residents in select Indian cities where ECS facility is available. The rate of interest at this time is 7 per cent for
24-35 months, 7.25 per cent for 36-59 months and 7.75 per cent 60 months.

General Manager HDFC, Conrad D'Souza said, "Customers have an option of fixed and floating rates on the loan side. It gives them an option on the deposit side as well. With interest rates expected to rise, this also allows customers to eliminate interest rate risk."

The HDFC SSP is a secure and steady way for depositors to grow their savings as the scheme is safe from the volatility of the capital market. Depositors on the other hand get the benefit of higher rate when interest rates increases.

Many other banks such as SBI, Bank of India and Union Bank of India had introduced floating-rate deposit schemes however most of them have withdrawn them due to the sluggish demand in the market.

Analysts believe that the timing for this launch by HDFC is right as scheme could get a good market response because the interest rate in the country is expected to go up.

Some banks have started raising interest rates on deposits. Union Bank of India raised the rate by 75 basis points for one-year to two-year deposits. ICICI Bank has also raised the interest rate by 25 basis points to 5.75 per cent for deposits of Rs 15 lakh to Rs 1 crore maturing in 270 days to less than one year from January 8.