The fixed deposit (FD) rates in the industry have started heading southwards following the rates cut by Reserve Bank of India since October 2008. The banking leaders in the industry including State Bank of India (SBI), Punjab National Bank (PNB) and ICICI Bank that have already reduced the FD rates are soon going to cut the rates further.

Recently the FD rates have been constantly falling and that too in every 15 days. For instance, SBI's 1,000 day FD that was offering 10.5% in early December fell to 10% in mid-December and further down to 9% in beginning of January. This indicates that investors who blocked their funds at that point of time will be better off. However those who missed at that time should invest right away as FD rates are likely to decline further and there still some segments left where attractive rates are offered.

FDs with tenures ranging between 1 year and 3 years are still being offered at attractive interest rates. For instance ICICI Bank's 590-day and 890-day FDs are earning good returns of 9.75%. Similarly FD rates for a 20-month deposit of HDFC are being offered at 9.65%.

Despite of low interest rates for most banks, some banks are still offering high returns because they need money at this time. Senior General Manager of ICICI Bank, Maninder Juneja said, "A bank first decides on the tenure where it would need the maximum money and FDs of that particular tenure are branded and sold accordingly."

Experts in the industry feel that currently a two year FD should be beneficial for the investors as there are expectations that the interest rates would rise up once economy and stock markets starts improving. Further it would be advisable to invest in an FD for now because it will yield stable returns at a time when stock markets are not performing well.

Besides there is a high safety factor associated with the FDs. "A fresh look at equity markets or floating rate funds could be taken once things stabilize a bit more," said a financial planner.

Moreover financial advisors suggest to opt for FDs of public sector banks that have a good past record. Head of Centrum FCH Wealth Managers, Sriram Venkatasubramanian said, "This may lower your returns by around 25-50 basis points, but currently credit risk is the first criteria that an investor should look at."