The rate war for fixed deposits has unleashed again amongst banks. Fixed deposits are a preferred investment option for many conservative investors who prefer to keep themselves hedged from market risk.

As banks fight to attract depositors with the most attractive fixed deposits, senior citizens have a chance to rejoice. Retired people mostly depend on safe investment options with FDs being the most preferred. A rise in interest rates comes as big benefit for them who depend on earnings from these deposits.

IDBI Bank is paying 10% interest to senior citizens for 1100 day maturity. Along with this the added benefit provided to all customers is that no penalty would be charged in case they decide to break the FD before maturity.

The largest lender of the country, State Bank of India is paying senior citizens an interest of 9.5% for 555 day deposits while it offers 9% to regular customers for deposits of the same tenor.

Banking major, HDFC Bank is paying 9.50% to senior citizens and 9% to regular customers for FDs of 2-yearand-16-day maturity.

The cash crunch in banks is a resultant of the policy tightening measures enforced by Reserve Bank of India. "Unless inflation is brought under control, RBI will not ease the liquidity situation in a big way," said a bond dealer. "And there is no indication that inflation will come down anytime soon," he added.