Lending rates at Indian banks saw a minor decrease while deposit rates continued an upward trend in September 2024, according to the latest data from the Reserve Bank of India (RBI).
The weighted average lending rate (WALR) on fresh rupee loans offered by commercial banks edged down to 9.37 per cent in September, slightly lower than the 9.41 per cent recorded in August. Additionally, the WALR on outstanding rupee loans experienced a similar minor drop, decreasing from 9.91 per cent in August to 9.90 per cent in September.
Deposit rates, however, moved in the opposite direction, with banks offering higher returns on new deposits. The weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits rose to 6.54 per cent in September, up from 6.46 per cent in August. The WADTDR on outstanding rupee term deposits also saw a modest increase, from 6.93 per cent in August to 6.95 per cent in September.
These adjustments reflect banks’ responses to the RBI’s policy actions. Since May 2022, the RBI has raised the policy repo rate by 250 basis points, prompting banks to adjust their repo-linked external benchmark-based lending rates (EBLRs) in line with this increase. From May 2022 to September 2024, the median 1-year marginal cost of funds-based lending rate (MCLR) for scheduled commercial banks (SCBs) has risen by 170 basis points.
The impact of these adjustments varied across different bank groups. Public sector banks (PSBs) saw a more significant rise in the WALR on new rupee loans compared to private banks. In terms of deposit rates, however, PSBs also experienced a relatively higher increase in rates compared to private sector banks, signaling a more prominent transmission effect of policy rate hikes across the public sector.
