Short term FD rates rise sharply

Short-term retail fixed deposit (FD) rates have risen sharply over the few days, as banks offer better rates on deposits up to six months, on expectations of softening of interest rates over the long term.

The country's largest bank, State Bank of India (SBI), has upped rates on FDs by 100-225 basis points across all tenures up to 180 days. SBI is now offering 6.25 per cent for deposits between seven to 90 days and 7 per cent for deposits maturing in 91-180 days.

According to senior officials from SBI they think the interest rates would come off after six months time with the inflation coming under control and there was no reason to pay more for longer tenures when rates would come down after six months.

The peak interest rates that some leading banks in private and public sector are offering on fixed deposits in tenures below 180 days 

• State Bank of India 7.00
• Bank of India 7.00
• Punjab National Bank 7.00
• Union Bank of India 7.00
• HDFC Bank 6.75
• Axis Bank 6.75
• Bank of Baroda 6.25
• ICICI Bank 6.00

Meanwhile private sector lender HDFC Bank has upped rates on FDs of shorter tenure with other banks are expected to follow suit. 

Meanwhile, the State Bank of India on Tuesday took a ''large step'' to align its deposit and lending rates in the current regime of rising interest.