The largest lender of the country, State Bank of India has raised interest rates on fixed deposits in the range of 50 to 150 basis points. The banking major has indicated that lending rate hike is soon to follow.

The bank has declared that 555 and 1000 days deposits will now fetch 8.5% interest with the current revision.

The RBI had recently advised banks to raise FD rates and cut loan rates as a step to bring down the net interest margins of banks. "Lower NIMs will not be healthy for the banking sector," said O P Bhatt, Chairman, SBI.

"That SBI has raised deposits rates would technically result in a hike in lending rates as well," said S Ranjan, deputy managing director, SBI.

He added that with rise in cost of deposits, the benchmark prime lending rate as well as base rate will soon be revised by the bank The bank will also revise its teaser loan scheme. RBI's idea to remove teaser loans was resented by SBI  earlier.

In the current deposit rate hike, the steepest has been seen in the 46 to 90 day category where the interest has been raised to 5.5% from 4% earlier, a 150 bps rise. 1 year deposits will now fetch 7.25% as against 6% earlier.