Bank fixed deposits are becoming are increasingly becoming unattractive for small investors after several banks have consistently cut interest rates in the past three months.

Consider this: The country's largest bank, State Bank of India (SBI) has cut interest rates on fixed deposits four times in the past two months. In February this year, 1,000day deposit with SBI could fetch you an annual interest of 9 per cent. Today, for the same period the interest is 7.50.

There is a likelihood that rates could come down further because the government would favour a low interest rate regime.

Here are a few other options:

NBFC deposits

What if banks have lowered the rate? Non-banking financial companies are still giving better returns on their FDs, but they are riskier in nature. Take Sundaram Home Finance as an example: the company offers 9.5 per cent for deposits between one and two years. Three-year deposits can fetch investors 10 per cent annualised returns.

For better returns in the short-term (1-2 year), one can also look at deposits from other finance companies such as Hudco. It offers 8.5 per cent on short-term deposits.

Corporate deposits

There are many reputed companies that have issues on tap. Godrej Industries is offering 9.5 per cent for 2year and 10 per cent for 3year deposit. Mahindra and Mahindra also has a 1-year deposits that gives 10.5 per cent returns. The 3-year product offers 11 per cent annual returns. There are host of other companies that investors can look at including Indian Hotels, Tata Motors and United Spirits. Kisan Vikas Patra (KVP): Banks have played smart while they have reduced rates. They have kept the rates for tax savings deposits (over 5 years) competitive. SBI and Canara Bank, for instance, give 8 per cent and 7.5 interest for deposits over 5 years respectively.

This makes bank FD at par with other Post Office schemes. These include time deposit, National Savings Certificate and recurring deposit.

This instrument offers 8.41 per cent returns and the money doubles up n 8 year and 7months. The minimum investment is Rs 100. There is no upper limit.

Though the rates are better than FDs and other Post Office products, they have adrawback. The investment in KVP cannot be used to claim exemption under Section 80 C of Income tax.

Monthly Income Scheme (MIS)

Another scheme from Post Office's stable, offer 8 per cent returns. There is a bonus of 5 per cent on invested amount, if the customer continues till the end of the tenure of 6 years.

There is a smart way to make more money in this scheme. The depositor can invest the monthly payout from this scheme in recurring deposit. This will help in earning about 10.5 per cent annual returns at the end of the scheme tenure.

The minimum amount to open a MIP account is Rs 1,500. There is a cap on the upper limit. For single account holder it is Rs 4.5 lakh and Rs 9lakh for joint accounts.

MIS too does not give any tax benefit just like KVP.

Before putting in their money, investors should look at the tax implications of these. All these products are taxed in a similar manner. The returns from these investments are clubbed with the investor's income and tax is levied as per the income slab.

Investment advisers suggest that though the interest rates of some schemes may sound too attractive, investors should avoid breaking existing FDs for an interest rate difference of 1-1.5 per cent.