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Fresh loan rates rise 21 bps in H1 despite 125 bps repo cut; deposit rates diverge: RBI Bulletin

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Fresh loan rates rise 21 bps in H1 despite 125 bps repo cut; deposit rates diverge: RBI Bulletin

Fresh loan rates rise 21 bps in H1 despite 125 bps repo cut; deposit rates diverge: RBI Bulletin

The weighted average lending rate on fresh rupee loans rose 21 basis points in H1 FY27 despite the Reserve Bank of India’s cumulative 125 basis point repo rate reduction since February 2025, as strong credit demand outpaced deposit growth and increased funding pressure on banks.

Fresh loan rates: WALR on fresh rupee loans rose 21 bps in H1 FY27, while rates on outstanding loans declined 3 bps. Credit demand: RBI said bank credit growth outpaced deposit growth, increasing funding pressure on banks. Deposit rates: WADTDRs on fresh and outstanding deposits moderated by 40 bps and 6 bps, respectively, during H1 till August. Transmission: RBI said transmission to deposit rates strengthened in H1, while it moderated on the lending side.

The Reserve Bank of India’s 125-basis-point cumulative reduction in the policy repo rate since February 2025 has not translated into lower lending rates across the banking system, with fresh rupee loan rates instead rising in the first half of FY27. The weighted average lending rate (WALR) on fresh rupee loans increased by 21 basis points during H1 FY27 till August, while the WALR on outstanding rupee loans declined modestly by 3 basis points, according to the RBI’s October Bulletin. “Bank credit growth outpaced deposit growth, leading to increased funding pressure,” the RBI said. The rise in fresh lending rates came even as the policy repo rate has been cut by a cumulative 125 basis points since February 2025.


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