Bank of India and Bank of Baroda have raised deposit rates by 25-50 basis points. More banks are likely to follow suit in the coming days with deposit as well as lending rate hikes. One basis point is one hundredth of a per cent.

Banking sector analysts said banks are jacking up deposit rates after three years. In 2001-02, the longest term deposit of five years and above used to fetch as much as 7.00-7.50 per cent.

Bank of Baroda and Bank of India are offering 5.75 per cent on five year deposits after the hike. Five-year government bond yield has risen from its lowest of 4.61 per cent in October 2003 to 7.20 per cent now.

State Bank of India Chairman A K Purwar today indicated increase in short-term deposit and lending rates while ICICI Bank said the review would take place after Diwali.

If SBI hikes rates, most other public sector banks will be forced to join the bandwagon. Allahabad Bank and Indian Overseas Bank recently carried out a rate hike.

Bank of India has increased rates across the board from Wednesday.

While the 7-14 days deposit rate is unchanged at 3.50 per cent, the 15-45 days increased to 4.50 per cent (4.00 per cent), 46-364 days at 5.00 per cent (46-179 days was at 4.50 per cent, 180-364 days was at 4.75 per cent), 1 year to less than 2 years at 5.25 per cent (5.00 per cent), 2 years to less than 3 years at 5.25 per cent (5.25 per cent), 3 years to less than 5 years at 5.50 per cent (5.25 per cent) and 5 years and above at 5.75 per cent (5.50 per cent).

Bank of Baroda has raised the rates by 25 basis points effective November 16. Bank of Baroda's deposits up to Rs 15 lakh for 7-14 days will be 3.25 per cent , 15 - 45 days  4.25 per cent (4.00 per cent), 46 -90 days 4.50 per cent (4.25 per cent), 91-180 days 4.75 per cent (4.50 per cent), 181 days to less than 1 year at 5.00 per cent (4.75 per cent), 1 year to less than 2 years at 5.25 per cent (5 per cent), 2 years to less than 3 years at 5.50 per cent (5.25 per cent) and 3 years & above at 5.75 per cent (5.50 per cent).

This in response to the prevailing market conditions and considering the repo rate hike carried out by the Reserve Bank of India in the mid-term Annual Policy Statement for 2004-05, said Bank of Baroda in a press statement.

The liquidity conditions in the system have been tight. The RBI on Wednesday released Rs 7,080 crore (Rs 70.80 billion) through its repo window to ease the strain on liquidity. Early this year, banks used to park over Rs 60,000 crore (Rs 600 billion) excess liquidity with the RBI.