Fixed deposits india

South Indian Bank has hiked the interest rates on NRE term deposits by up to 0.50 per cent for various maturities.

As per revised rates, interest rate on NRE deposits of 1year to less than 2 years and 2 years to less than 3 years has been increased to 3.71 per cent from 3.21 per cent and 3.81 per cent from 3.31 per cent respectively. Nowadays we could earn some more interest on investing in fixed deposits which is the safe and secure investment plan.

Interest rates on deposits of 3 years upto and inclusive of 10 years have been raised to 4.13 per cent from 3.63 per cent .

Interest rate on 1year to less than 2 years FCNR deposits denominated in US Dollars have been increased to 2.96 per cent from 2.46 per cent, on two-less than three years to 3.06 per cent from 2.56 per cent, for three-less than four years to 3.38 per cent from 2.88 per cent, for four to less than five years to 3.60 per cent from 3.10 per cent. For five year deposits, the rate will be 3.76 per cent.(up from 3.26 per cent ) .

Similar revisions have been made in FCNR deposits in denominations of Pounds and Euro, previous rates being given in brackets .

FCNR deposits in Pound Sterling will carry 5.77 per cent(5.27), 5.15 per cent(4.65), 5.13 per cent(4.63), 5.08 per cent(4.58) and 5.03 per cent(4.53) for the respective periods.

The corresponding rates for deposits in Euro are 5.08 per cent(4.58), 4.63 per cent(4.13), 4.53 per cent(4.03), 4.48 per cent(3.98) and 4.43 per cent(3.93).

Looking to invest in fixed deposits (FDs)? This is the right time with the deposit rates in the range of 9.5% to 10.50%. And fixed deposits maturing in 400 days will reap the maximum benefits.

Five of the 20 banks whose fixed deposits DNA checked - ABN Amro Bank, Bank of Baroda, Bank of India, Development Credit Bank and Indus Ind Bank - are offering 400-day fixed deposits at higher interest rates than for other maturities.

While ABN Amro Bank is paying an interest rate of 10.25%, the other four banks are paying an interest of 10% on deposits which mature in 400 days. What makes 400-day deposits stand out is the lower interest rates offered on other fixed deposits that mature in almost a similar tenure.

For instance, ABN Amro Bank is paying an interest of 9.75% on a fixed deposit of 399 days and 9.5% on a fixed deposit of 401 days. So, it definitely pays to get your maturity matched.

ICICI Bank is offering an interest rate of 10% on its 390-day fixed deposits while the Union Bank of India is offering 10% on fixed deposits maturing in 444 days. The second largest private sector bank in the country, HDFC Bank, is offering 10% interest rate on a maturity of 1 year 15 days to 1 year 16 days. Kotak Mahindra Bank is offering 10.12% on its fixed deposit for 390 days.

Several other banks don't seem to be favouring any specific maturities and are offering higher interest rates on all fixed deposits. State Bank of India, the largest bank in the country, is offering an interest rate of 10% on a maturity of anywhere between one year and less than two years.

With banks increasing their fixed deposit rates in the past couple of weeks, fixed maturity plans (FMPs) by mutual funds are also offering higher 'indicative' returns. FMPs can only indicate and not guarantee returns.

For instance, LIC Mutual Fund and Birla Sun Life Mutual Fund have offered 11 per cent returns for their 13-month FMPs that are closing on August 25.

Other fund houses such as Lotus Mutual Fund, ABN Amro Mutual Fund and Kotak Mutual Fund have indicated returns of 10.65 per cent for small investors.

Banks, on the other hand, are offering 7.5 to 10.5 per cent for fixed deposits of different tenures.

According to Hemant Rustagi, CEO, Wise Invest Advisors, a distributor of mutual funds, all the short-term (less than 91 days) FMPs that closed recently revised their rates upwards of 10.5 per cent. Many of them revised their returns during the tenure of the new fund offering (NFO) as well. Tata Mutual Fund, IDFC Mutual Fund and Franklin Templeton closed their short-duration schemes by offering an annualised yield at 10.7 per cent, 10.75 per cent and 10.6 per cent, respectively. So you have money to invest then go with SBI fixed deposit who offering attractive interest rates with outstanding tax rebates.

When the issues had opened for subscription, these funds were offering returns in the region of 10.3-10.5 per cent. A senior official at Lotus India Mutual Fund claimed that for their current schemes, they intend to keep on revising the rate of return till the last day to keep themselves abreast with the interest rate scenario.

However, before investing, it is important to remember that FMPs are a riskier form of investment as against FDs. This is because they invest in commercial papers and, in bad times, some companies, with whom the FMP funds are placed by the asset management company, could default on their commitments. This could put the principal amount at risk.

In fact, in the last few months, many fund houses have consciously stayed out of papers issued by real estate companies and non-banking financial institutions because they were perceived as riskier sectors. Some even declared this intention in their offer documents.

FMPs are debt-based funds that buy highly-rated money market instruments and commercial papers (CPs) issued by companies and certificates of deposits (CDs) issued by banks. These close-ended schemes have multiple tenures such as three months, six months and over a year or more. Depending on the tenure of the FMP, fund houses invest in CPs and CDs that have a similar maturity period. The minimum amount that can be invested is Rs 5,000.

A factor that makes FMPs attractive is the tax efficiency of these products. "The additional tax benefits attract investors more than the higher yields," said Vikrant Gugnani, CEO, Reliance Asset Management.

Short-term FMPs are taxed at the rate of 14.16 per cent, if the dividend option is chosen. In the longer tenure ones, that is more than a year, the investor is charged 10 per cent without indexation and 20 per cent with indexation. Also, there are double indexation benefits for tenures of over a year. In comparison, FD returns are clubbed with investors' income and taxed accordingly.

A day after the Reserve Bank raised key rates to tame inflation, country's second largest PSU lender PNB decided to raise its benchmark lending rate by 100 basis points from next month, making home, corporate, personal and auto loans dearer.

"The board has decided to increase PLR by 100 basis points and deposit rates in between 75-100 basis points effective August 1 in a bid to maintain margin," Punjab National Bank Chairman and Managing Director K C Chakrabarty told reporters in New Delhi. You may check out the updated PNB fixed deposit rates here and also their terms & conditions.

The Prime Lending Rate (PLR) of the bank which stands at 13 per cent will go up to 14 per cent resulting in the rise in all the PLR-linked loans like home, personal, auto etc.

PNB is the first bank to announce a hike in both deposit and lending rates after RBI increased short-term lending rate (repo rate) by 50 basis points and mandatory deposit banks have to park with the central bank (CRR) by 25 basis points on Tuesday.

Giving reason for the hike Chakrabarty said margins are under pressure following the tight monetary stance of the central bank. In order to maintain profit margins it was

necessary to revise the rates.

He said the bank expects profit to grow by 20 per cent during the current fiscal. The bank recorded a net profit of Rs 2,048 crore during 2007-08.

The PLR hike comes exactly after a month of the earlier revision.

The bank last raised lending rate by 50 basis points to 13 per cent effective 1st July.

He said, fixed deposit rates would be increased as much as 75 basis points across various maturities.

The stock markets have dropped and interest rates are rising. And fixed deposits (FD) have become the flavour of the month. In the recent months, the stock markets had an edge over fixed deposits, because of the booming stock indices.

Also, the government's saving schemes, especially the post office saving schemes, had an edge over the FDs. However, the recent changes have again brought investments in FDs into the limelight . The contributing factors include the decision to give tax breaks in terms of coverage under Section 80C of the Income Tax Act. Another important factor has been the gradual increase in the interest rates on FDs.

These deposits have been brought on par with the small savings schemes. Investments in term deposits offering a tax deduction will have a lockin period of five years. The government notification says that no term deposit can be encashed before five years from the date of investment. The ceiling on investments is Rs 1 lakh for tax deduction. The interest earned on these deposits will attract tax either on an accrual basis or on receipt basis. If the deposit is made with a joint holder, the tax benefit will be available only to the first holder.

The deposit rate hikes by banks will persuade people to put more money in fixed deposits thereby helping term deposits grow faster, say bankers.

Banks have hiked deposit rates for various tenures by 25-75 basis points after the Reserve Bank of India hiked the key short-term lending rate, repo rate 25bps on June 11 and both the repo rate and cash reserve ratio 50bps each on June 24, taking them to 8.5% and 8.75% respectively.

Most of the banks' deposit rate hikes came into effect in end-June or beginning of July.

Prakash P Mallya, chairman and MD, Vijaya Bank, too, believes there could be a significant rise in fixed deposits. "With the equity markets not doing well, people do not have the confidence to put their money in stocks and they will in turn invest in fixed deposits," he says.

A senior official at a public bank says there will be a rise in term deposits going forward, with people putting more money in fixed deposits. However, he says predicting the rate of growth is difficult. "But a rise in fixed deposits means an increase in cost of funds for banks," the official said. Some analysts, wishing anonymity, says the term deposit growth rate could be 'healthy' and higher than the usual fluctuation of 200 bps between monthly figures.

Vaibhav Agarwal, banking analyst at Angel Broking, feels that the growth of aggregate deposits, which include time and term deposits, will hover around 20% or less for the rest of the year. But he sees money moving from current and saving account deposits to fixed deposits, thereby putting banks' CASA under pressure.

However, M S Sundara Rajan, chairman and managing director of Indian Bank, believes that there is not going to be any dramatic jump in fixed deposits.

"Savings account deposits are picking up better than term deposits this year, with people wanting to keep a larger share of their disposable income in their savings accounts," he says, citing the example of his bank.

After increasing the lending rates, banks have started increasing deposit rates. This will bring some cheer for depositors - particularly for the retired persons and those who mainly depend on interest income.

The deposit rates may be revised upwards further, if inflation continues to rise. High rate of inflation affects the net return of a depositor. With inflation at 8.75%, net return to a depositor has already been reduced substantially. It is believed that if inflation persists at the current rate, banks will have to revise both the lending as well as deposits rates upwards again.

After SBI, which had increased the deposits rates last month, Oriental Bank of Commerce, Yes Bank and Bank of India have increased deposits rates by half a percentage point to one percentage point.
Oriental Bank of Commerce has raised the rates for its special deposit scheme Asha Kiran (FDs for 400 days) to 9.75% for senior citizens.

For the common man, the interest rate on 400-day deposits is 9.25%.

Yes Bank increased the rates by 0.5 percentage points across all maturities. After this, senior citizen depositors of Yes Bank would get a maximum of 10% on fixed deposits with a maturity of one year to 18 months. The others would receive 9.5% return.

SBI revised FD rates for 5-10 years by 0.5 percentage point to 9% while 3-5 years tenure was hiked by 0.35 percentage points. Senior citizens will get 0.5 percentage more.

Bank of India also increased deposit rates up to 0.5 percentage point for various maturities. For maturities between one year and two years, the revised rates would be 9.15%, against the earlier rate of 8.50%. For two to three years, the new rate is 9.25% as against earlier rate of 8.75%.

Similarly, fixed deposits of Bank of India of the maturity of three to five years will earn 9.50% interest, against the earlier 8.75%.

Recently, Reserve Bank of India had hiked the overnight lending rates for banks by 0.25 percentage points. A senior banker said this has led to rise in both the deposits as well as lending rates.

If the inflation continue to rise and crosses 10% mark, there will be another bout of increase in the interest rates in the country.

Punjab National Bank (PNB) is actively getting involved with financing of manufacturing activities. The bank on Tuesday signed an agreement with IL&FS Cluster Development Initiative to provide finance for industrial infrastructure projects in the country.

This comes at a time, when growth in the manufacturing sector dipped to 3% in March 2008 from a 16% increase a year ago. The bank has ruled out revising deposit rates upwards in the immediate future, triggered by concerns on rising inflation.

The bank's SME portfolio was at Rs 18,198 crore. There is no margin money requirement for loans up to Rs 2 lakh under SME advances, a statement said. The bank is extending loans up to Rs 50 lakh to micro and small enterprises without third-party collateral security under the credit guarantee scheme.

Punjab National Bank chairman KC Chakrabarty stated that under the MoU, the bank would finance the various industrial infrastructure projects covering various manufacturing sectors. These projects include common infrastructure facilities like effluent treatment plants, hazardous waste disposal, water supply, greenfield industrial parks, upgradation of existing industrial estates, quality control labs, design centres etc.

An estimated Rs 2,500 crore will be earmarked for such projects. These projects are expected to yield 1,00,000 jobs over the next five years, Mr Chakrabarty said. Apart from the common facilities or industrial park infrastructure, the bank will also finance the various SME units coming up in these industrial parks for their various credit needs.

The term loans for fixed assets will be extended, apart from the working capital loans for their operational needs. All financial needs of the various industrial units will be met by the bank. Nearly 45% of the total contribution to manufacturing comes from small and medium units. The cluster development initiative of IL&FS is a group company of IL&FS and has been created to meet the various needs of the industrial clusters.

Under the MoU, the company will be responsible for sourcing of the projects, project structuring, project development, engineering & procurement, project management and supervision, due diligence and project monitoring. Despite bank deposits getting eroded with rising inflation, Punjab National Bank on Tuesday said that there was no immediate plan to increase deposit rates.

The country's largest bank, SBI, had raised deposit rates effective this month. "Inflation is higher. There would be pressure on interest rates. At present, there is no plan to increase deposit rates," Mr Chakrabarty said. Outlook on interest rates seems to be stable, he said, adding the interest rates are still higher than the inflation and there is incentive for depositors.

State Bank of India (SBI) on Monday said it has decided to revise interest rates on domestic term deposits rate with effect from June 1.

The country's biggest bank has raised the interest rate on 3-5 year deposits by 35 basis points to 8.85%, while on 5-10 year deposits the rate has been hiked by 50 basis points to 9%. On 2-3 year deposits, the interest rate has been increased by 25 bps to 8.75%.

For senior citizens, SBI has carved out two new deposit schemes. Instead of the 2-10 year deposit, the bank has announced two new schemes i.e. 3-5 years and 5-10 years. The interest rate on these two schemes will be 9.35% and 9.5%.

"The Fixed Deposit as an instrument is dead. There was a time when it was very popular with retirees and those approaching superannuation. Now even if the Reserve Bank of India were to allow free access to such deposits, there won't be too many takers. The stock market boom over the past few years, the dominance of mutual funds and ULIPs has almost eliminated this investment option," says a senior NBFC industry official. He was reacting to the news that the RBI is thinking of limiting access to deposits only to banks.

The RBI has not been comfortable with Non Banking Finance Companies (NBFCs) since 1998. The RBI did not want to be protector of public deposits - a role thrust on it when NBFCs faced a crisis. It tightened the regulatory norms for NBFCs and tried to limit access to fixed deposits window by introducing ratings and fixing the limits to such borrowings. These efforts have borne fruit over the last decade.

The number of such deposit taking entities has come down drastically since then. Over the last five years, the entities have come down by half to about 401 as of March 2007. The volume of such deposits has also shrunk from a little over Rs 5,000 crore to about Rs 2,000 crore as of March 2007. It is in this background that the RBI is now contemplating limiting the public deposits window to banks alone.

So will anyone be affected if the move comes through? NBFC industry officials think a few small NBFCs will find intermediation costs going up.

They will have to perforce approach banks who may charge higher rates. The larger companies are already diversified in their funding sources and will not have a problem, feel industry insiders.

Dreams can suddenly turn into nightmares. The Indian stock market in recent times fits that category. From an all-time closing high of 20873.33 on January 8, 2008, it has fallen nearly 28 per cent to close on 14994.83, on March 19. Economic theory tells us that higher prices dampen, and lower prices increase demand. But when the stock market witnesses a bull run, investors do not behave like normal consumers. As stock prices go up, the more stocks appeal to investors. One big fall and nobody wants to buy.

"Now the latest blinkered vision in the market is to avoid the street entirely! That is wrong again," says Suresh Sadagopan, a certified financial planner who runs Ladder 7 Financial Advisories.

This leads to investor psychology during a bull run that is detrimental to the investor as well as to the market. "I had invested in a few bank stocks when the Sensex was at 20000, thinking nothing can stop this juggernaut. Almost half of the amount I invested has been wiped of," says Abhijit Bhandari, who works for a new generation private sector bank. Investors like Bhandari have no one else but themselves to blame.

With markets having fallen, common sense tells us this is the best time to enter the market. If stocks made a good buy at 20000, they make a good buy at 15000. "There is a sale on Dalal Street but very few people seem interested - despite the fact that this does not come often. The last big one, called the dot-com bust sale, was in 2001," says Sandeep Shanbhag, director of AN Shanbhag NR Group, an investment and tax advisory.

It makes more sense for investors to stick to equity mutual funds and have an indirect exposure to the stock market. Agrees Swapnil Pawar, director of Directors, PARK Financial Advisors Pvt Ltd: "They should be investing in mutual funds. However, it is best done over a period of three months rather than in one shot. Also, they need to have an investment horizon of at least one year. Three years is quite safe."

"Get into mutual funds with a long-term horizon to reap the full benefit of the existing, lower prices. For those who want to invest on a monthly basis, systematic investment plan (SIP) route remains a favourite. To unlock full value, I would suggest staying invested for five years. But even a two-year time frame should get them returns, much above fixed deposit rates," says Sadagopan.

This does not mean that you should bet your entire savings on equity mutual funds. "Asset allocation is key. Have around 10-15 per cent of your portfolio invested in gold, as it is an effective hedge during uncertain times Don't buy physical gold - use exchange traded funds (ETFs). Allocate another 15 per cent to relatively safe debt funds. Cash can command 10 per cent. The balance is to be invested in equity, not in a lump sum but in a staggered manner through SIPs. Through the mechanism of SIPs, which essentially immunise you against market turbulence, discretion goes out and discipline walks in," says Shanbhag.

Ranjit Sehgal works as a system analyst at one of the top IT companies of India. Apart from forwarding emails, which his job requires him to do, he passionately tracks the domestic equity market. His favourite anecdote about the market until recently was: "Each time the market crashes, if you sell your house and invest in the stock market, in a month, you'll be able to move a couple of suburbs closer to South Mumbai."

Two months ago, all you had to do was name a stock and he would have told you its last traded price. You name a brokerage and he would have told you which stocks they were betting on. Any news or rumour, no matter how trivial, as long as it was remotely related to the equity market, he had it covered.

A day didn't pass by without him arguing, disputing, advising or seeking advice on various message boards on the internet. He was a much sought-after man by friends and acquaintances, who had all heard of his uncanny ability to spot a multi-bagger and wanted to find a better avenue for their cash than the low-risk low-return bank deposit. He followed his own advice and put all the money he had to spare into stocks - for he believed that stocks were king.

Barclays bank launched mobile banking service 'Hello Money' which will enable customers to make banking transactions from their mobile phones. According to Barclays the service is unique since it is based on the Unstructured Supplementary Service Data (USSD) platform which it claims is a safer and quicker channel than the currently prevailing platforms like text-messaging and GRPS.

Hello Money will not only allow customers to carry out a range of banking transactions from balance inquiries to third party fund transfers but one can also make utility and credit card bill payments through the service, apart from requesting for doorstep-banking or starting a fixed deposit in india.

Indian rating agency Crisil said it has enhanced the 'P1+' rated amount of Corporation Bank's certificates of deposit programme to 50 bln rupees from 30 bln rupees, and reaffirmed the 'AAA' rating for the bank's 3 bln rupees lower tier II bonds and 2 bln rupees lower tier II bonds, and the 'FAAA' rating for the fixed deposit programme.

The ratings continue to reflect the Indian public sector bank's strong capitalisation, superior asset quality, and comfortable resource profile. The ratings also factor in the bank's limited size and geographical concentration, Crisil said.

Crisil, a unit of unit of Standard & Poor's (NYSE:MHP) Ratings Services, said it has also factored in the support the bank is expected to receive from its majority owner, the government of India, in the event of distress.

The outlook for the lower tier II bonds and the fixed deposit programme is stable, reflecting expectation that the bank's financial and business profile will remain robust, supported by strong capitalisation and high asset quality.

With the global business climate looking decidedly dark, Indian citizens are getting ready for the rains. They will be hoping that the finance minister Mr P Chidambaram will have the brolly ready on February 29. The Economic Times-Hansa Research Mood of the Nation Poll says that the majority of the people expect living standards to improve only a little over the course of next year.

Those in the East and the West believe that price rise has hurt them a lot in the past one year, and all four regions without exception are wary about the price rise in the coming year. The key indicators of consumer confidence over the next year, i.e. propensity to buy a house, car or household durables also look mildly - if not overly - pessimistic.

March is just a month away and tax investments are probably taking priority. The usual suspects are insurance, equity-linked saving schemes (ELSS), PPF to seek some tax exemptions. Another instrument, which is getting popular among tax savers, is the five-year tax-saver fixed deposits (FDs).

Five-year tax-saver FDs

In Budget 2006, the government extended tax benefits to five-year tax-saver deposits. As per the existing provision, you are eligible for exemption on five-year deposits on investments up to Rs 1 lakh. These fixed deposits will be locked for a five-year period from the effective policy date. So, you cannot exercise the option of premature withdrawal. Secondly, you cannot pledge the term deposit as collateral to secure a loan to meet your liquidity needs. Similarly, banks do not offer overdraft facility on tax-saver deposits.

Unlike the plain vanilla fixed-deposit products, these tax-saver FDs do not have the sweep-in facility. This implies, you cannot link fixed deposit to the savings account whereby the surplus funds in the savings account can be automatically invested in this fixed deposit.

In addition, there is no overdraft facility available on the tax-saver FD. As this instrument of saving money is special due to its tax-saving status, banks do not extend relationship benefits on the tax-saver FD.

Small Industries Development Bank of India (Sidbi) has reduced its prime lending rate and interest rate on deposits by 0.50 per cent and 0.25 per cent respectively. Currently 12.5 per cent, the PLR would be reduced to 12 per cent with effect from 28 January, an official communique from Mumbai said here today.
Meanwhile, the interest rate on deposits has been reduced by 0.25 per cent across the board and across all maturities from 19 January. Sidbi currently offers interest rates in the range of eight to nine per cent on fixed deposits depending on the duration of the deposit.
Established in 1990, Sidbi's mission is to empower the micro, small and medium enterprises (MSME) sector with a view to contribute to the process of economic growth, employment generation and balanced regional development. Sidbi finances the MSME sector through a wide network of other primary lending institutions such as banks, state financial corporations (SFCs) and micro finance institutions (MFIs).

It has been repeatedly mentioned in this column that sometimes your best investments are the ones you don't make.

In fact, on December 19, 2007 we specified the investments you should not make in order to be a successful investor.

However, 2008 is a brand new year - time for a fresh start. So, to kick off things, we talk about the basic building blocks of a sound financial profile this week. Though each individual's life situation is different, the following principles of financial planning are universally applicable.

Medical insurance

Medical insurance is a non-compromisable expense, especially in a country like ours, where the state does not cover medical costs. Everyone, young or old, male or female, salaried or with business income, should without exception get a medical cover for himself/herself. Else, if and when an emergency strikes, apart from health consequences, the repercussions on one's finances can be disastrous.

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Of course, if you are salaried, more often than not the employer arranges for medical insurance. But, here too, most would not be aware of the exact amount of coverage. Hence, ideally, have a family floater policy for a minimum amount of Rs 5 lakh.

The premium for a family of four comprising husband, wife and two kids would be in the region of Rs 8,000-8,500 per annum.

Life insurance

The basic financial tenet regarding insurance is that it's a cost and not an investment. Combining insurance with investment almost always leads to sub-optimal returns.

First, buy insurance only if your family needs it.

Secondly, always (and I repeat, always), opt for a term insurance policy, which is the cheapest and the purest form of insurance. A 30-year-old can purchase a Rs 10 lakh cover for a premium in the region of Rs 3,500 to Rs 4,000 p.a.

If you find you have bought expensive insurance, consider surrendering the policy. Sometimes, you make the right decision and sometimes you have to make the decision right.

Interest rates are unlikely to fall in near future as it was expected with the State Bank of India raising the fixed deposit rate of various maturities up to 1.5 percentage points. Other banks are also planning to raise deposit rates. After SBI increasing deposit rates, other banks have no choice but to raise the rates to mobilize resources in the domestic market, chairman of a public sector bank said.

As the cost of funds for banks will increase, they will resort to raising the lending rates. A senior banker said banks would announce the increased rates in near future.

SBI has decided to increase deposits rate to 7% on maturity of 91 days to 180 days. The rate on deposits of maturity period between 181 days and one year has been revised by one percentage point to 7.50%. Similarly, rate on one year and 549 days have been increased by half a percentage point to 8.75%. That on deposits of 550 days has been increased by 25 basis points to 8.75%.

While rate on two years and three years has been increased by quarter a percentage point to 8.5%, that on three years and 10 years remained unchanged at 8.5%.

Links-via-The Time of India

State Bank of India on Thursday hiked rates on fixed deposits of up to two years maturity. This is the second time in less than a month that the bank is hiking its deposit rates.

The interest rates have been hiked by between 0.5 and one percentage point with immediate effect. The bank increased the interest rates by tweaking the time bands in its fixed deposit programme.

A senior official from SBI said the rate hike followed demand from retail investors. "We are assessing our customers' needs, especially retail customers, and therefore decided to offer higher rates," he said.

On December 12, 2007, SBI had increased the rates on deposits of one year to 549 days and on deposits of 551 days to less than two years by 25 basis points.

source: The hindubusinessline

Fixed deposits are a good investment avenue. Fixed deposits offer a fixed rate of return on the amount invested. The deposits are made for a fixed tenure at a fixed rate of interest, decided in advance. Accordingly, the interest rate remains same throughout the tenure of the fixed deposit in India. This is irrespective of the changes in the market interest rates.

With the increase in interest rates, investment in fixed deposits has again become attractive. FDs had become dormant investment option for the past few years because of the fact that the interest rates were low, and these investments are unsecured investments.

However, the decision to give tax break in terms of coverage under Section 80 C of the Income Tax Act , and the increase in the interest rates on the FD's have again rekindled investor interest in these instruments. Fixed deposits also act as a hedging tool.

One can hedge against the future decreases in the interest rates by investing in fixed deposits. Fixed deposits are basically deposits placed with a bank or a company for a fixed period of time - usually from six months to five years at a specified rate of interest.

Bankers are betting on 2008 to be a better year than 2007 in terms of business as low inflation, comfortable global liquidity and strong economic fundamentals would mean lower interest rates and hence much more business than 2007.

2007 was a year of Reserve Bank of India rate hikes. The cash reserve ratio (CRR) hikes that started in December last year haunted bankers all through 2007, with the RBI increasing the ratio for five times this year.

Besides CRR, the central bank also hiked the repo rate two times by 25 basis points each time and sucked out excess liquidity using bond auctions through the market stabilisation scheme five times this financial year.

The resultant tight liquidity and higher costs of deposits caused banks to hike borrowing rates by more than 1 per cent, making loans expensive for the common man and badly affecting banking business. Credit growth has dropped drastically this year, to 22 per cent from last year's peak of 32 per cent.

State Bank of India has announced a 25 basis points cut in interest rates on fixed deposits of less than one year. However, the bank has increased rates on two term deposits. The rates for one year to 549-day FDs and for 551 days to two-year FDs have been increased from 8 per cent to 8.25 per cent. However SBI will continue to offer a maximum rate of 8.5 per cent for three to ten years....

The main reason for the waning public interest in government-sponsored small savings schemes is the low interest rates on these instruments. Particularly, five-year fixed deposit schemes of banks, which were brought under Section 80C in the current financial year, offer better returns.

For example, State Bank of India is offering a return of 8.5% on five-year deposits along with Section 80C benefits. The return on a five-year POTD scheme, however, is only 7.5%.

The extension of the tax benefits under Section 80C to the senior citizen savings scheme is relief to those above 60 or those above 55 who have opted for early retirement. Under the scheme, a senior citizen can invest up to Rs 15 lakh for a minimum period of five years. The return given by the government on the scheme is 9%.

Under section 80C, an investment up to Rs 1 lakh in instruments like PPF, National Savings Certificate, POTD and five-year bank fixed deposits are deducted from the taxable income of the depositors to calculate their tax liabilities.

Public sector lender Bank of India today revised the interest rates for Foreign Currency Non- Resident External (Banks) deposits and Non-Resident External deposits also compare fixed deposit rates to secure your money for future.

For deposits in US dollar, Pound, Euro, Yen, Canadian Dollar and Australian Dollar, rates have been revised to 3.71 per cent, 5.30 per cent, 3.94 per cent, 0.35 per cent, 3.98 per cent and 6.95 per cent respectively for maturity periods between 1-2 years, a bank release said here today.

For maturity periods between 2-3 years, rates have been revised to 3.19 per cent, 4.77 per cent, 3.67 per cent, 0.28 per cent, 3.44 per cent and 6.67 per cent respectively, for the above currencies, it said.

Within days of the Reserve Bank of India (RBI) sounding a warning to banks against the practice of not paying interest on premature withdrawal of deposits, major banks have started scrambling to restructure their fixed deposit schemes. Most banks, including State Bank of India, have withdrawn special schemes. ICICI Bank, the country's second-largest lender, has lowered interest rates on deposits by 25-50 basis points.

It may be recalled that many commercial banks had launched deposit mobilisation campaigns through their special deposit schemes. Under these schemes, banks offered slightly higher interest rates than regular deposits of comparable maturities. But it came with riders such as stipulated minimum investments and lock-in periods with no premature withdrawal facility.

If you had invested your hard earned money in the Fixed Deposits of a company, and then the company declared itself bankrupt, you would be a in for a rude shock. The company would be declared sick, and you have very little chance of getting your money back. Not a good situation to be at all. In some cases, the company would be deliberately declared sick so as to defraud the investors of their money. Once the company is granted protection by the BIFR (Board of Industrial & Financial Reconstruction), the company has immunity to claims made against it by its investors. Even to initiate legal action against the company so as to get your money back, you would have to get the permission of the board.

This has changed; there was a judgment by the Karnataka High Court that deposits to the company were not in the nature of money lent, but money held in trust; as a result, the company could not use the legal protection for claims for recovery of this money. In a recent case, a litigant made the National Consumer Commission aware of this ruling by the Karnataka High Court and the precedent was adopted by the National Consumer Commission.

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An agitation was launched at the Chembugudde Mescom office by CPI (M), Ullal zone activists to protest against the move of the department to fix deposits on electricity consumers, here on Tuesday November 14. The protestors were demanding that the deposits given by consumers should be returned back to them by the authorities.

Acceding partly to this demand, Mescom officials agreed to temporarily suspend the collection of deposits. The department also agreed to convene a meeting in which consumers, police officials and traders would be invited. Senior Mescom officials here stated that they will not collect deposits unless the meeting is convened for sorting out the matter, and case any officer comes to collect deposits, a consumer can file a complaint. Stringent action will be initiated against such an official, the official pacified.

A protest march was taken from Thokkottu bus stop to the Mescom office by CPI (M) party. CPI (M) had plans to stage protest in front of the Mesom office, along with several hundred consumers who had joined hands with them. Unfortunately, they could not do so as the police did not allow them to enter the Mescom premises.

This resulted in a verbal altercation between the police and the protesters. Fuming over Mescom official apathy in not hearing their grievances, CPM Ullal general secretary Ramachandra Ucchil and others forcibly entered the Mescom premises.

Although some banks have resorted to cutting deposit rates to protect margins, it is increasingly felt the banks will have to continue offering higher deposits rates to make them attractive. Sources in the finance ministry are of the view that banks cannot afford to make deposits unattractive vis-a-vis other investment options.

Most banks are facing a margin squeeze because the rise in interest expenditure is more than the increase in interest income as the busy season kicks in."Deposit rates are most crucial. They willdictate lending rates. Banks need to be careful about disincentivising customers. There are too many investment options rivalling bank deposits. I don't think deposits are priced irrationally," a banker said.

Punjab National Bank and Union Bank reduced deposit rates last week. Centurion Bank of Punjab announced a cut of up to0.50% on fixed deposits for one year and above to 8% from 8.5%. The bank also announced a 0.25% cut on fixed deposits for a term of 13 months and 15 days to 9.0% from 9.25%.State Bank of India (SBI), the country's largest lender, announced a cut in its peakinterest rate offered on the 550-day deposit by 25 basis points to 8.75% from November 9.

Country's largest private sector lender ICICI on Tuesday cut interest rates on its special deposit schemes by 0.25 to 0.5 per cent with effect from November 12.

It also announced an alignment of interest rates for deposits of greater than one year to 8 per cent, a release stated.

Interest rate on 390-day deposit has been cut to 8.5 per cent, and that on 590-day deposit will be 8.75 per cent down from earlier 9 per cent, the bank said.

It has also discontinued the 890-day special deposit scheme on which it was offering a 9 per cent interest.

State Bank of India (SBI) increased the fixed deposit rates on select maturities, reports agency source.

The Reserve Bank had on October 30 increased the CRR by 50 basis points to 7.5%. CRR is the proportion of deposits that banks have to keep in reserve. The decision was expected to absorb Rs 160 billion from the banking system.

As per the changes made by SBI, one year to 550 days fixed deposit will attract interest at 8.75% as against 8% paid earlier.

For senior citizens, the rate will be 9.25%, an increase of 0.75%.The new rate will come into effect from Nov. 07, 2007.

Banks have sought greater leeway in structuring their Fixed deposit schemes after the banking regulator clamped down on the special deposits scheme which was being offered by several banks.

At the customary meeting with Reserve Bank of India governor YV Reddy on the day of the monetary policy, bank chiefs made a strong case for operational freedom in designing such schemes.

Bankers pointed out the five-year deposit scheme offered by banks under a scheme notified by the government, which offers income tax breaks, does not allow customers to withdraw prematurely before the maturity of the scheme.

The Reserve Bank of India has asked banks to withdraw all special fixed deposits schemes that have lock-in feature. The central bank said that such schemes do conform to its guidelines.

In a circular issued to all banks, RBI has said that some banks are offering special term-deposit products, in addition to regular term deposits, ranging from 300 days to five years with conditions different from the regular deposits. RBI has taken severe objection to features like 6-12 month lock-in period on deposits, not paying interest on pre-mature withdrawal, and offering higher rate of interest than offered on normal deposits.

"No bank should discriminate in the matter of interest paid on deposits, between one deposit and another, accepted on the same date and for the same maturity, whether such deposits are accepted at the same office or at different offices of the bank," said the circular. There are only two exceptions to this rule. Banks are allowed to offer higher interest rates on fixed deposit schemes specifically for resident Indian senior citizens and on bulk deposits of over Rs 15 lakh.

Have you met a financial planner?' asked Raj over their daily morning walk.

With a raised eyebrow, Karthik said he didn't need one as he already had his family insurance agent.

Besides insurance, he was investing in fixed deposits and small savings schemes, and his agent had even started recommending mutual fund schemes and was helping him with his investments. Why on the earth would he need a planner?

Raj smiled, but repeated his question. Karthik seemed a bit confused at first, but soon thought he knew what his friend was up to and burst out laughing.

Over four crore subscribers of the employees provident fund (EPF) will earn an 8.5 per cent interest on their deposits for 2006-07. The Centre today approved the rate recommended by the EPF board.

Central provident fund commissioner A. Viswanathan said, "The government has notified the rate of interest for the year 2006-07 at 8.5 per cent."

Labour and employment minister Oscar Fernandes has asked regional provident fund commissioners to issue the annual statement of accounts for 2006-07 immediately.

The Central Board of Trustees of the EPF had recommended an 8.5 per cent rate in July despite opposition from trade unions.

The unions were seeking higher returns.

They said bank fixed deposits were paying attractive interest rates.

Commercial banks are offering up to 9.5 per cent returns on fixed deposits depending on tenure.

However, banks are beginning to reduce rates, as they are flush with funds and credit offtake is slow.

The State Bank of India (SBI) on Monday sought the Supreme Court's direction for vacation of the stay on its decision to discontinue with the Janata Deposit Scheme.

The scheme was introduced in 1971 to mobilise savings, especially of middle and low income groups of people in the country. The apex court after hearing the plea issued notices to deposit collectors of the scheme asking to explain why should the stay not be lifted. Various high courts have stayed SBI's decision to discontinue with the scheme on the plea of deposit collectors for the scheme.

A former manager of the United Bank of India has been charged of issuing a fake fixed deposit receipt, FDR to a customer while he was serving as a branch manager of the bank in Moreh.

Moreh police station has registered a case in this regard after the current branch manager Kh Dhanabir of the UBI, Moreh branch lodged a complaint on October 4 last. He alleged the former branch manager, Thounoujam Mangi who retired from service in February 2000, of issuing the fake FDR.

He reported to the police that Mangi during his tenure as manager of the bank had issued a fake fixed deposit receipt (FDR) no. 987603 DID on February 13, 1995 for Rs. 50,000 in the name of one L Samandanda Singh of Moreh ward no. 2 in Chandel district.

In line with cut in deposit rates by other banks, Indian Bank has revised downwards interest rates on foreign currency and rupee-denominated NRI deposits from this month. Interest rates on FCNR (B) deposits (dollar denominated) maturing in on e year to less than two years has been cut to 4.15 per cent from 4.53 per cent.

Deposits for two years and less than three years would now fetch 3.84 per cent against the current 4.15 per cent, while those for three years and less than four years would carry 3.89 per cent against 4.16 per cent at present. For four-year and less tha n five-year deposits, interest rates are now fixed at 3.99 per cent against 4.20 per cent and five years and above 4.08 per cent against 4.26 per cent.

The day is not far when domestic liquidity will set the tone for Indian equities and may even end up being the next big trigger for the market. Given that India's domestic savings rate is among the highest in the world, it's only natural that that we start putting our money where our mouth is. While foreigners have been largely responsible for the current rally, domestic savings may soon become a worthy competitor to global inflows in the Indian stock market.

With a 33% savings rate, India is second only to China. While the Chinese stock market has been enjoying a strong domestic liquidity-driven rally, we believe that it's only a matter of time before a similar phenomenon is witnessed in India. In fact, the change is already visible, given the sustained rise of over 25% in total equity asset holdings of mutual funds (MFs) and a more than 200% growth in unit-linked insurance policies (Ulips) in FY07. And with around 50% of India's population in the 25-35 year bracket, more incremental savings can be expected to move into domestic equity.

Moreover, this year much of the incremental growth in savings has been towards bank deposits, given the sharp peaking of interest rates last year. But with interest rates now heading South, most banks are cutting deposit rates, which can increase the quantum of household savings switching to equities

The Delhi State Consumer Commission has slapped a penalty of Rs100,000 on a private sector bank for lapses in finalising the account of an 85-year-old customer, the Press Trust of India news agency reported on Monday.

"In our view a lump sum compensation of Rs100,000 for the actual loss, mental agony, harassment and physical discomfort encountered by the appellant due to the negligence, indifferent and insensitive attitude of the respondent shall meet the ends of justice," Commission president Justice J D Kapoor said.

The Commission asked Axis Bank to pay the amount to octogenarian Surya Narayan Saxena, a resident of Swasthya Vihar, New Delhi, who alleged that the bank had paid him less interest on a deposit and also reduced the balance amount in his saving bank account.

Setting aside a decision of a district consumer forum, Justice Kapoor said it had failed to compare statements of accounts issued by the bank to Saxena and those submitted by the complainant himself.

Saxena, who was having a saving account with the bank, lodged a complaint with the district forum in March 2006 on the ground that his balance amount had been reduced from Rs383,000 to 329,000 in March 2003. His another grievance was that he was paid less amount of interest on his fixed term deposit.

State Bank of Bikaner & Jaipur (SBBJ) revised the interest rate on fixed deposits for various maturities.

The 1-2 year term deposits would now invite an interest rate of 9 per cent, SBBJ informed the Bombay Stock Exchange.

Interest rate on 2-10 year deposits has been fixed at 8.5 per cent, it added.

At the same time, for fixed deposit with maturity between 180 days to one year has been revised to 7 per cent, it said, adding, for 91-179 days it has been altered to 6 per cent.

The Reserve Bank of India's (RBI) latest move to allow Indians to double overseas investments to $200,000 (Rs79.4 lakh) may not trigger an immediate rush among investors to seek opportunities abroad. This is one of a string of measures that the Indian central bank announced on Tuesday to encourage investments abroad and rein in the appreciating local currency.

They blame RBI riders for such a response. In February 2004, when such remittances were first allowed, the central bank had prohibited banks not based in India from soliciting any financial products except for foreign currency fixed deposits.

Chennai-based Indian Bank revised interest rates on fixed deposits, effective from September 1.

Interest rates on term deposits of tenure one to less than three years have been revised to 9 per cent, Indian Bank informed the Bombay Stock Exchange.

Fixed deposits of 3-5 years would now draw an interest rate of 8.75 per cent, it said, adding that a maturity period of over five years would attract a rate at 8.5 per cent.

The short-term deposit rates of tenure 180-364 days and 91-179 days has been fixed at 7 per cent and 6.5 per cent respectively, it added.

Following the Reserve Bank's decision to increased the mandatory cash deposits of all banks, or cash reserve ratio, by 0.5 per cent to 7 per cent in its monetary policy review on July 31, many banks lowered the deposit rates.

Major banks like ICICI Bank and State Bank of India decreased interest rates on short-term deposits during the month. Other banks that reduced deposit rates were Bank of India, Bank of Baroda, Centurion Bank of Punjab and State Bank of Bikaner and Jaipur.

Interest rates on fixed deposits (FDs) have been on their way up for sometime. But what is more interesting is the fact that banks have been offering higher interest rates on FDs of certain tenors.

The latest to join the bandwagon is the largest private-sector bank in the country, ICICI Bank. The bank is offering an interest rate of 8% on a 390- day FD. The minimum deposit required here is Rs 10,000.

The interest rate offered on this special deposit is 1.25% more than the rate offered on deposits with a slightly lesser or higher tenor. For example, on FDs with tenors of 391 days to 2 years also, the interest rate offered is 6.75%. On FDs with a tenor between 366 days to 389 days also, it is 6.75%.

The post office is trying hard to woo back small investors. Banks have weaned away a chunk of post office customers with higher interest rates on fixed deposits.

In a notification last month, the finance ministry has raised the investment limit for individuals in post office monthly income scheme to Rs 4.5 lakh from Rs 3 lakh earlier.

The 50 per cent hike in the investment limit is also applicable to joint accounts. A maximum of Rs 9 lakh can be kept in an MIS account held jointly by two; for three persons jointly holding an account, the maximum investment can be Rs 13.5 lakh.

"We hope this will encourage people to invest in the scheme once again," an official release said.

Indian rating agency Crisil, a division of Standard & Poor's (NYSE:MHP) , said it has reaffirmed Federal Bank Ltd's short-term fixed deposit programme at 'P1+'.

The bank has also enhanced the bank's certificate of deposit programme, rated 'P1+' to 40 bln rupees from 30 bln rupees.

Crisil said its ratings on the bank's short-term debt instruments continue to reflect the bank's healthy earnings profile, strong franchise among Keralites including those who are non-resident-Indians (NRIs) and sound capitalisation levels.

However, Crisil said the rating strengths are partially offset by the bank's average asset quality, geographical concentration in the Southern Indian state of Kerala, and pressure on its resource profile.

Indian rating agency Crisil said it has upgraded its rating on Jindal Saw Ltds (JSL) fixed deposit programme to 'FAA-' from 'FA+' with a stable outlook.

Crisil, a division of Standard & Poor's (NYSE:MHP) , said the rating action is driven by expected strong improvement in JSLs capital structure and debt protection measures, after the companys decision to sell its equity stake in its US-based entities for an enterprise value of 900 mln usd.

The rating continues to reflect JSLs strong position in the domestic submerged arc-welded pipes industry, robust growth in operating income, diversified revenue base, healthy growth prospects in end-user segments and strong order book position, Crisil said.

It added these rating strengths are, however, partially offset by the high working capital intensity of the business, and vulnerability of operating margins to fluctuations in raw material prices.

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Banks are garnering term deposits with a renewed vigour, as such deposits help correct the asset-liability mismatch to some extent and impart stability to deposit base.

State-run banks, with the largest repository of low-cost deposits such as current and savings accounts, are ready even to take the risk of an increased cost of deposits as term deposits help reduce deposit base volatility.

"The CASA (current and savings accounts) deposits which are around 40 per cent, would be difficult to improve on from these levels. Even maintaining CASA at this level will be a challenging task," said T.S. Narayanasami, chairman and managing director, Bank of India.

Share of current and savings accounts in state-run banks' total deposits range from 35 per cent to 42 per cent. Such deposits can be withdrawn anytime and banks offer 3.5 per cent on savings bank deposits.

As opposed to this, banks offer fixed deposits with tenures ranging from 7 days to 5 years and above. Majority of these come in the 1-3 year bracket, with 8.5-9.0 per cent interest rate.

Since the interest rates are higher, customers park funds in term deposits rather than savings deposits.

Another advantage of raising term deposits is that they help banks offer long-tenure loans.

"The term deposits are also important in order to maintain the match between asset and liability. However, we would like to maintain CASA at the current level as this has been the strength of the bank historically,"

In the last few years debt funds have not been of investor interest, and not without reason. With an average 3-year return of 4.7 per cent, these funds had little to offer investors who were seeing their equity fund portfolios returning 48 per cent in the same period. The likes of bank fixed deposits and post office monthly investment schemes had supplanted debt funds.

But all this is in the past. Debt funds are making a comeback. So, is it time for investors to take a relook at them?

Debt funds were on a roll till early 2003. Interest rates had come down from 14 per cent to below 7 per cent, and debt funds were a direct beneficiary of this. Unlike products like FDs and POMIS, they generated returns both from interest income and the gains from the increase in the value of the bonds.

In January xxx1, Miss Scholar, Mr Executive and our Pensioner Aunty invested certain amounts in fixed deposits (FDs) with their banks. Based on the interest rates prevailing at the time of investment, and tips from friendly advisors at the bank, all of them opted for a 910-day (two years and six months) cumulative deposit scheme.

In July xxx1, they find that interest rates have gone up across maturities and are about to commence a southward journey. What should the investors do now? Should everyone break that six-month old FD and rebook a new one at higher interest rates?

Our investors are aware that premature encashment of FD has no penalty, but interest is payable at rates applicable on the shorter tenure. They also know that in this age of ATMs, net banking and phone banking, breaking a term deposit and reinvesting is a quick and simple process. However, the decision to break the FD or not, is something else.

State Bank of Bikaner and Jaipur (SBBJ) announced it has reduced interest rates on deposits of various maturities with effect form August 10.

Banks are reducing interest rates on deposits following the Reserve Bank hiking cash reserve ratio - proportion of deposits to to be parked with the central bank - by 0.5 per cent hike to 7 per cent during July 31 review of the Monetary Policy.

SBBJ has slashed rate of fixed deposits for 91-179 days by 25 basis points to 6 per cent, while those for 180 days to one year deposit would attract 7 per cent interest from earlier 7.5 per cent, the bank informed Bombay Stock Exchange.

One-year fixed deposit rate has been cut by 50 basis points at 8.25 per cent from the earlier level of 8.75 per cent, it said.

There is more bad news in store for investors who may have been toying with the idea of retreating from volatile stock market investments to 'safer' fixed deposits with banks. Flush with funds, most banks are cutting interest rates on fixed deposits, or reducing the incentive for deposits of longer tenure.

Market leader State Bank of India announced a 're-alignment' of interest rates on fixed deposits on Monday. It cut the rate on one of the most popular slabs, namely deposits for periods ranging from 1-2 years, by 0.25 per cent to 8 per cent. Though there has been a marginal hike of 0.25 per cent in longer-term deposits, the slab has been extended. Depositors will get 8.5 per cent interest on deposits of 3-10 years (instead of the earlier 8.25 per cent for 3-5 years and above.

Public sector banks, in a frenzy to cash in on the retail credit boom during the three years beginning 2003-04, had failed to price interest rate risks on fixed rate loans properly. In the process, these banks are now taking a hit on their margins.

Even though the cost of deposits has increased by almost 200 basis points in the last one year, public sector banks are stuck with fixed rate home loans given at 8-8.5 per cent, just 50 basis points more than floating rate loans at 7.5-8.0 per cent. The pricing flexibility in floating rate home loans saw banks raising interest rates on these loans by 200-400 basis points during the period.

The banks had failed to anticipate the sharp unexpected rise in interest rates. In contrast, private sector banks have always been maintaining up to 2-2.25 per cent differential between the fixed rate and floating rate home loans. About 10-15 per cent of home loans portfolios of large banks like State Bank of India (SBI) and Punjab National Bank are given at fixed rates.

The Reserve Bank of India kept its short-term rates unchanged as expected but raised the amount of cash that banks must hold in an attempt to contain the surging liquidity that has pushed overnight rates to near zero.

India's banks are awash in cash mainly because the central bank, in a bid to check the rupee, has been buying U.S. dollars. The dollar hit a nine-year low of 40.20 against the rupee on July 24.

State Bank of India (SBI) has reduced its peak rate on deposits by 25 basis points to 9.25 per cent.

However, the bank has raised interest rates by 25 basis points on deposits for 271 days to less than one-year and for those over 3 years.The bank has reduced the rate on the SBI Smart Deposit Scheme for 550-day deposits from 9.5 per cent to 9.25 per cent, effective August 9.

Public sector banks like Canara Bank, Bank of India and Bank of Baroda hadcut deposit rates by 50 basis points on one-year deposits last week.

Finance minister P Chidambaram, speaking a day after the Reserve Bank's credit policy review, said on Wednesday that he expected the interest rates on fixed deposits of shorter maturities to come down by 0.5 per centage points.

"Banks may lower deposit rates of one-year maturity by 0.5 percentage points. Some banks have already done that and the interest rate has come down to 8.5 per cent. My impression is that it will stabilise at that level," Chidambaram told reporters after a meeting with chief executive officers (CEOs) of public sector banks here.

Chidambaram observed that the Reserve Bank of India (RBI) is concerned about liquidity, which has surged as more rupees have flooded the system in view of an inflow of foreign funds. "That is why the cash reserve ratio (CRR) was raised by 50 basis points," the minister said.

The Union Finance Minister P Chidambaram has expressed possibility of reduction in interest rate in fixed deposits for one year by around .5 per cent. At present this interest rate has reached up to 10 per cent. Even though some banks have already fixed the same and the interest rate has been reduced to 8.5 per cent, but even after this he said on Wednesday that the banks could reduce interest rate by .5 per cent in one year's maturity deposits. The FM believes that this rate would finally settle at 8.5 per cent. Bank of India reduced interest rate to 9 per cent from 9.5 per cent on Tuesday. For nipping the case of Reserve Bank the rate of cash reserve ratio was increased from 6.5 per cent to 7 per cent. Reserve Bank is worried about cash problem. He said that it is a valid worry of RBI. With the reducing of .5 per cent in fixed deposits it would help in nipping Rs 16000 crore additional cash. The initiative of reducing .5 per cent interest rate is like cutting the pockets of common man. This step cannot be said to be right. There is no justification on slashing of interest rates in fix deposits. People deposit their money for future security through fixed deposits, but with this attitude of banks the interest of the people would lessen. On the loans taken from banks it takes more interest and gives comparatively less interest on deposits.

Investors today are flooded with various choices of investment instruments like fixed deposits, shares, unit trust, gold, bonds, etc. Before investing, it's important to gauge your risk appetite.

Risk appetite is sometimes influenced by our culture, upbringing, character, age or profession. For instance, the older a person gets the more risk averse he's likely to be. Therefore, there are factors to consider when making an investment. Ask yourself; how much capital do I have to invest? What is my expected rate of return? Is it short, medium or long term investment? What are the options available to me? How much I could afford to lose? How do these options compare against each other? Have I considered all possible costs of investment?

By answering these questions, we can narrow down the choices to those that most suit us. This is one method of profiling. It reduces confusion in deciding which type of investments we should invest in.

State Bank of Bikaner and Jaipur (SBBJ) has lowered fixed deposit interest rates by 15 to 100 basis points effective from July 18, 2007. Fixed deposits of one year term will now get interest rate of 8.75 per cent compared to 9.75 per cent earlier. Interest rates have been increased by 15 bps for term deposits of tenure 2-3 years to 8.75% from the earlier 8.6 per cent.

If you have been toying with the idea of parking some money in fixed deposits, now is the time to do it. Come August 1 and all banks - public and private - might effect a cut in interest rates on deposits. According to experts, this is because of the system witnessing rising cash inflows and a softening inflation.

It is now increasingly being felt that banks will have to cut borrowing and lending rates to control the amount of money coming in. Something that's already being witnessed in the form of many highyield deposits having been withdrawn by some banks.

It's a reasonably well-known fact that many banks insist customers open a fixed deposit with them to rent a safe deposit locker.

In large cities, some banks ask for a minimum Rs 25,000 as fixed deposit for a locker. A 63-year-old Mumbai consumer complains that a cooperative bank demanded Rs 1 lakh as the minimum deposit amount.

Banks, however, were permitted to seek a deposit but not as a condition for allotment and use the interest to cover the annual rent. Alternatively, advance rent could be collected for three years.

At a time when war clouds are hovering, it always makes sense to scout around for safe investment options.

As you are aware, fixed income products are the best bet in times of uncertainty. Though even interest rates have been fluctuating in recent times, you will still get the rate of interest promised by the borrower at the time of investing. There are institutions that come out with periodic ratings of companies and their investment products.

The interest rate offered by a triple A rated company is always slightly lower than a company that has lower credit rating.