Lloyds TSB is to increase the interest it pays on its current accounts to 3.2 per cent in a bid to attract new customers.

The move, which comes into force on February 10, means Lloyds will pay the highest interest rate on current accounts on the High Street.

The announcement comes after Halifax, Bank of Scotland (HBOS) and Abbey National stepped up their campaigns to alert consumers to the poor interest rates paid by the big four banks.

Lloyds previously paid interest of just 0.1 per cent, compared with HBOS and Abbey National's 3.04 per cent.

But Lloyds insisted the move was not in response to competition from other banks but followed research showing a good rate was becoming increasingly important to customers.

Eric Daniels, group executive director of UK retail banking at Lloyds TSB, said: "This current account pays the best credit interest rate on the High Street, combined with reduced overdraft rates and all the benefits of a major bank.

"This is good news for our customers and will allow us to grow our business even further by attracting new customers looking for excellent value and accessibility."

To qualify for the rate consumers must register online for a Plus account and use Lloyds' internet banking at least six times every three months.

They will only qualify for the higher 3.2 per cent rate if they pay more than £2,000 a month into their account. Those who pay more than £1,000 in will be paid interest at a lower rate of 2.53 per cent.

The bank is also reducing its authorised overdraft rates to as low as 8.7 per cent.

An HBOS spokesman said: "It's a good move for consumers and reflects the pressure the likes of ourselves have put on the big four."

Abbey National, which currently offers £50 to anyone who can get a better deal on a current account, said it was looking at the Lloyds' statement.

Consumer magazine Which?, which has been running a campaign urging consumers to change bank to get a better deal, welcomed the news but called on Lloyds to extend the rate to all customers.

Ashley Sharpe, head of money research at Which?, said: "This shows that consumer pressure, catalysed by our campaign, is beginning to bite.

"It is of course great news for Lloyds TSB's customers who have online access and pay in at least £1,000 a month. But it leaves a major question mark for the millions who do not have online access or have lower incomes."