Equity market is going through despair banks have something to celebrate about FDs people are approaching them with surplus cash as banks are offering attractive returns on short-term fixed deposits (FDs). Most of the banks are offering interest rates ranging from 9% to 10.5% on deposits for periods ranging from six months to two years.

Albert Tauro, chairman and managing director of Vijaya Bank said, “FDs are yielding positive returns as it beats inflation levels.”

V K Dhingra, executive director of UCO Bank said, “The rate hike is thanks to the credit crunch banks were facing a while ago. Post our hike in FD rates to 10.5% for one-year deposits earlier this year, people began pulling funds out of stocks and mutual funds and began investing in FDs.”

The bank is having an enormous Rs 82,000 crore FD amount, and is growing at 17% year on year.

DBS Bank is the latest one to hike interest rates on deposits. In the beginning of this month, it raised interest rates on FDs with maturity between 180 and 270 days by up to 125 basis points to 10.75%.

According to bankers these short-term FDs offer a good option for people who are waiting for a clear picture on the economy to emerge.

C Abraham, general manager of Union Bank, said, “Investors can stay invested for a short tenure with assured returns at a healthy interest rate.”

In August Union Bank had introduced a new term deposit product of 444 days on which it offered an interest rate of 10% per annum.

George Joseph, CMD of Syndicate Bank, said some depositors are taking out the money from their savings account to reinvest in FDs. FDs giving 10.5% per annum, offer a safe hedge against inflation, which was on the edge of 10% mark.

Syndicate Bank is carrying out a door-to-door campaign to raise deposits from high net worth individuals (HNIs).

Joseph said, “We have raised Rs 700 crore of HNI money from Delhi and Kolkata in November, of which 60% were FDs.” The bank is having Rs 36,000 crore FD portfolios which grew at 30% year-on-year last quarter and is expected to maintain it for this fiscal.

Though, the party might not last very long. The Reserve Bank of India has propelled in enough liquidity into the system with its monetary measures. Therefore banks might not have to rely on FDs for mopping up funds much longer.

While Syndicate Bank and Corporation Bank have announced that they will be reducing interest rates on one-year deposits starting December 1. Other banks are also expected to follow suit.

Until the special interest rates being offered, there is an opportunity for investors to approach the nearest bank and invest some money in FDs.