In a move which is being seen as a way to lure depositors to meet their credit and other needs, the State Bank of India announced an increase in medium to long term fixed deposits rates by up to 0.50 per cent from June 1, 2008.

This is not the first time that the bank has increased its interest rates. Just last month, SBI had raised fixed deposit rates and the latest move is likely to have a fall out on interest rates regime in the banking sector. However, there is less respite for the customers with speculation in the market that the second largest public sector bank Punjab and National Bank (PNB) might make changes on the rates following its Asset Liability Committee (ALCO) meeting.

The country's largest lender, State Bank of India has increased the interest rate on different deposits by different amounts. The bank has increased the interest rates on deposits of two year to less than three years by 0.25 per cent to 8.75 per cent.

If the deposit is between three to less than five years, then the rates on deposits charged would be raised by 0.15 percent to 8.85, while those on deposits of five years and up to ten years have been hiked by 0.50 per cent to nine percent, the bank said in a statement here. So before to invest with sbi fixed deposit check out the best scheme for you.

However, there is no change in the deposit rates for less than two years.

The interest rate hike is expected to have an effect on the bank's net interest margin, which dropped from 3.41 percent in 2006-07 to 3.07 per cent in 2007-08.

Also we should expect other banks to consider similar rate increases - stay tuned.