The bank also raised its term deposit rates by 50 basis points for various maturities, in a bid to maintain its net interest margin.
The maximum interest rate on term deposit will be 9.5 per cent for a period of one to three years, the bank said in a release.
"For senior citizens, the rate of interest for the same period would be 10 per cent," it added.
The lending rate revision will lead to increase in PLR-related lendings like floating home loan, corporate loan, car loan etc.
Allahabad Bank's announcement came after major public sector lenders SBI and PNB raised their BPLRs by 0.5 per cent to 12.75 per cent and 13 per cent, respectively.
Similarly, Bank of Baroda and Bangalore-based Canara Bank also hiked its BPLR by 0.5 per cent to 13.25 per cent.
Last week, major banks like SBI, PNB had also hiked the deposit rate by up to 50 basis points for various maturities.
The rate hike comes in the wake of RBI increasing its short-term lending rate and the mandatory level of deposit banks are required to keep with the central bank, by 50 basis points each to contain inflation.
Shares of Allahabad Bank were trading at Rs 56.45, down 1.91 per cent on the BSE.