The short term deposits of banks are seeing a rise as most investors are turning back to park funds in fixed deposits. These deposits are deposits with maturity ranging between 3 and 6 months. There is around 40%-50% growth in fixed deposit with shorter tenure.

Investors earlier parked these funds with real estate and equity markets but market instability has changed the investment pattern which is currently inclined towards these short-term deposits. Banks are witnessing a rise in their fixed deposits in the recent times. In the last few months the fixed deposits of Kotak Mahindra Bank saw an increase by more than twice. Even ING Vysya Bank witnessed an over 50% rise in its short term deposits.

The country's second private lender, HDFC Bank also noticed an increase in its deposits. In the past nine months, the bank observed almost an 80% increase in its deposit front. Similarly Axis Bank has reported a 25%-30% growth in its 20-20 version of FDs. Manju Srivatsa, President, retail banking, Axis Bank says, "It's a massive turnaround. There's an overall increase in the demand and interest in FDs."

According to the latest RBI figures, Indian banks have clocked term deposits worth Rs 94, 811 crore in the month of October. However bankers feel this growth might have an adverse effect in the capital markets. In the recent times investors are withdrawing funds from mutual funds and reducing their stock portfolio in order to invest in bank deposit.

K V S Manian, Group Head, retail liabilities & branch banking, Kotak Mahindra Bank, said: "We have in general seen a higher customer inclination for FDs. While the lower retail segment was always inclined towards the product, the attractiveness of current rates has enhanced their interest. However, in case of the high networth individual segment, there's a definite shift in attitude around this product of late."

Uday Sareen, country head, retail banking, ING Vysya Bank, believes that this change may be noticed across the entire band of customers. "Given the current mood, individuals are deferring their decision to invest in real estate, stock market, and other investments. Gradually as people realign their expectations to the new financial paradigm, they will be willing to reassess their financial risk profile, financial goals and re-balance their portfolios," he said.

Anindya Mitra, senior vice-president, retail liabilities, HDFC Bank, feels that this trend is likely to follow until there is stability in the equity markets. "Capital protection is on top of the priority with investors right now. At least, in the short-term, equity is getting substituted by FDs in an investor's portfolio," he said.