The Reserve Bank of India (RBI) may announce a cut in key rates later this month but banks will likely continue to offer higher rates, thanks to tight liquidity and decline in deposit growth.

The finance ministry has long been calling for lowering of interest rates to provide a boost to economic activity, but the central bank has so far been reluctant in making any considerable cut in rate due to high inflation. But the central bank is now expected to announce a cut in key rates on March 19.

However, banks may not follow the move as any cut in rates will further intensity the existing situation of tight liquidity. Some experts even believe that rate may jump.

BA Prabhakar, chairman and managing director of Andhra Bank, said, "Interest rates will continue to be high till March even if the RBI cuts rates; it may even climb."

He added that rates might decline from April, but the decline would not be substantial. He said tight liquidity, decline in deposit growth, and banks' desperation to match their assets and liabilities would force banks to keep rates higher.

Recently, State Bank of India, Karnataka Bank and Punjab National Bank hiked term deposit rates by up to 1.25 per cent to attract more deposits.