At least two public sector banks � Union Bank of India [Get Quote] and Indian Overseas Bank [Get Quote] � have quietly increased interest rates on short-term deposits to raise resources and manage asset-liability mismatch.

Union Bank has announced a special deposit scheme for 400 days, which offers 9 per cent interest. The scheme was launched much before the announcement of the monetary policy, a bank official said. This scheme will remain open till June-end. "We need to mobilise more resources to match our credit growth," he said.

Chennai-based Indian Overseas Bank has also raised rates for large deposits with a maturity of one to three years. The revised rate of 9.1 per cent is effective from April 16. "The revision is based on the maturity profile of our deposits," IOB Chairman and Managing Director SA Bhatt said.

Punjab National Bank [Get Quote] Chairman and Managing Director KC Chakraborty ruled out any across-the-board change in interest rates, but said banks may alter deposit rates on specific maturities to avoid any asset-liability mismatch.

Bank of India's case is, however, curious. The bank issued a press release late afternoon announcing higher interest rates on select medium and long-term deposits by 50-75 basis points effective May 1. The release was withdrawn a few hours later. The PR agency said a revised statement will be issued shortly, but did not specify when.

BoI Chairman and Managing Director TS Narayanasami clarified that the bank had decided on the revision on April 24, before the announcement of the Annual Policy. At that point of time, the yield on 10-year government bond was about 8.20 per cent. This has now dropped to 7.79 per cent.

According to the BoI press release, which stood withdrawn, on deposits of less than Rs 10 crore, the bank is offering 9.15 per cent on one-year to less than two-year tenures against the old rate of 8.5 per cent. In the case of deposits in maturity bucket of two-year to less than three-year, the new rate is 9.25 per cent, compared to 8.75 per cent earlier