Three government-run lenders, viz. United Bank of India (UBI), Punjab National Bank (PNB) and UCO Bank, have recently hiked their respective interest rates on domestic term deposits.

Kolkata-based UBI hiked interest rates on domestic term deposits by at least 25 basis points, with immediate effect. It will now pay interest at a rate of 9 per cent on one-year maturity term deposits, up 25 basis points from 8.75 per cent previously. Interest on term deposits of 30 days to less than one year got increased from 8.50 per cent to 8.75 per cent.

Punjab-based PNB has announced an increase of 125 basis points in interest rates on certain deposits.

The third government-owned lender that has increase interest rate on term deposits is UCO Bank, which hiked interest rates on retail term deposits of Rs 1-5 crore by 45 to 50 basis points.

In the private sector, Karnataka Bank hiked interest rate on deposits by 25 basis points on all new retail term deposits of one to two years maturity period.

As per analysts, the situation of tight liquidity has been forcing banks to hike interest rates on deposit rates.

To cut costs, many lenders like UBI, PNB and State Bank of India have slashed the premium they pay to senior citizens by at least 25 basis points.

But, UCO Bank is still offering a premium of 75 basis points on deposit rates to senior citizens. The union finance ministry has suggested that lower premium will help banks cut their cost of funds.