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G. Madhan

HOUSING Development Finance Corporation's fixed deposit programme is one of the safer options. However, it comes with a relatively low interest rate. The short-term rates are almost at a par with that of average bank deposit rates. Investors who already have a portfolio of FD investments, interested in diversifying their riskcan consider this option as an alternative to bank deposits.

Senior citizens can also consider this as they are offered an additional 0.50 per cent for their deposits. Interest income on deposits from HDFC is eligible for tax deduction (Section 80L of the Income-Tax Act) up to Rs 12,000. However, there is an element of uncertainty about the continuation of tax concession if Kelkar recommendations are implemented.

HDFC is a dominant player in the housing finance industry. The company's credit quality is on the high side. HDFC's financial performance, for the half-year ending September 2002, indicates that the company has registered a 20.6 per cent growth to its net profits. For the period ending March 2002, non-performing loans were at 0.91 per cent of the loan portfolio. Schemes and features: Under the fixed deposit programme, an investor has a choice of cumulative and non-cumulative schemes.

Under the latter, the company offers monthly, quarterly, half-yearly and annual income plans.

Under the monthly income plan, the investor can choose between three tenors — one, two and three years at 7 per cent, 7.25 per cent and 7.5 per cent respectively. The minimum deposit for this plan is Rs 20,000.

Under the quarterly income scheme, for the same tenor, the interest rates offered are 7.05 per cent, 7.30 per cent and 7.55 per cent respectively. The minimum deposit for this plan is Rs 10,000. Under the half-yearly plan, interest rates offered for the same tenor are 7.10, 7.35 and 7.60 respectively. Under the annual income plan, for the same tenors, the interest rates offered are 7.25 per cent, 7.50 per cent and 7.75 per cent.

The interest rates for the cumulative deposit scheme is akin to that of the annual income plan. The minimum investment for non-cumulative schemes (half-yearly and annual) and cumulative scheme is the same at Rs 5,000.

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