In news that should come as a respite to customers, banks have started increasing their deposit rates to cope with inflation. This new move follows the steps taken by several banks in increasing their lending rates. This newest development will definitely bring some cheer for depositors — particularly for the retired persons and those who mainly depend on interest income.

The reason that the banks have increased their deposit rates is because of the high rate of inflation. If inflation continues to rise, the deposit rates may be revised upwards further. High rate of inflation affects the net return of a depositor. With inflation at 8.75%, net return to a depositor has already been affected substantially. Bank analysts believe that if inflation persists at the current rate, banks will have to revise both the lending as well as deposits rates upwards again.

Following the lead of the largest lender in the country, SBI, which had increased the deposits rates last month, Oriental Bank of Commerce, Yes Bank and Bank of India have increased deposits rates by fifty to hundred basic points.

For senior citizens, Oriental Bank of Commerce has raised the rates for its special deposit scheme Asha Kiran (FDs for 400 days) to 9.75%. However, for the common man, the interest rate on 400-day deposits is a bit lower to 9.25%.

Yes Bank has also helped the senior citizens more, even though it has increased the rates by 0.5 percentage points across all maturities. After this, senior citizen depositors of Yes Bank would get a maximum of 10% on fixed deposits with a maturity of one year to 18 months, while the others would receive 9.5% return.