The current hike in deposit and lending rates can be related to the above phenomenon. Another reason which might have triggered banks towards the move is RBI's advice to raise deposit rates and reduce lending rates in order to bring down their net interest margins (NIM).
RBI has advised that if credit flow is not a matter of concern for banks then they should move their real rates in a way that deposit growth is achieved. So far banks seem to be going the RBI way. Many banks have raised their fixed deposit rates. To know more on the new rates, visit rupeetimes.com
They have however said that reducing lending rates will not be a viable option for bringing down NIM as a dip in lending rates will increase their cost of funds. Major lenders like ICICI Bank, HDFC Bank and PNB have already raised their prime lending rates. The largest lender of the country, State Bank of India has recently raised its deposit rates by as much as 150 basis points. If SBI decides to raise its lending rates too, then it can be considered that loan rate hike is on board.