The chief of India's largest commercial bank, State Bank of India, said on Wednesday that the bank did not plan to raise interest rates on deposits, just days after an increase by a rival.

Bank of Baroda, a large state-run bank, raised deposit rates earlier this week by a quarter to half percentage point, following a recent rise in yields on government and corporate bonds, sparking speculation other banks might follow suit.

"We have no plans to hike deposit rates as of now," State Bank of India chairman A K Purwar told reporters on the sidelines of a news conference called to announce a car finance partnership between the bank and Maruti Suzuki.

"I think interest rates will remain stable in the near term, barring uncertainty of events," he said.

The government-owned State Bank of India, which has more than 9,000 branches across the country and accounts for a fifth of India's banking business, cut rates on long-term deposits by a quarter percentage point in mid-January, soon after government bonds yields dropped to record lows.

Yields had fallen to historic lows on expectations that the central bank would cut the short-term repo rate amid ample funds, boosted by the central bank's persistent dollar purchases in the face of robust forex inflows.

But yields have since risen, with the benchmark 10-year climbing to 6.59 per cent on Wednesday, from a record low of 5.82 per cent, hit on January 15.

At their record lows, yields had fallen nearly 4.5 percentage points over the past two years, when the central bank pursued a soft monetary policy.

But a recent spurt in inflation, fuelled mainly by a rise in global crude oil prices and demand for manufactured goods, has prompted bond traders to veer to the view that the central bank could switch to a neutral monetary policy in the next few months.