Deposit rates have been raised by many banks in the recent times making non banking finance companies (NBFCs) and housing finance companies (HFC) also decide to join the league.

Major HFCs like HDFC, LIC Housing Finance, DHFL and Hudco have announced to offer 7% interest on 1 year deposits as against the earlier rates of 6-6.5%.

Mahindra and Mahindra Finance (MMFL) is offering 8% interest on deposits of 1 year tenor. DHFL is paying 9% for a one year deposit where the minimum amount is Rs 10,000.

Ramesh Iyer, MD, MMFL said, "With interest rates moving up, banks have started increasing their deposit rates. As a result NBFCs too are increasing rates since there is typically a gap between rates offered by banks and us."

Says R Sridhar, MD, Shriram Transport, "We raised money for the first time in July and so we offered a slightly higher rate than some of our peers.

We have collected around Rs 500-600 crore and may consider lowering the rate now."