Indian bank lending, deposit rates show mixed trends
The Reserve Bank of India reported mixed movements in lending rates and a moderation in deposit rates for Scheduled Commercial Banks in June 2026. Data for May and June 2026 show varied trends across different loan and deposit categories.
Loan costs show varied path
The weighted average lending rate (WALR) on fresh rupee loans of Scheduled Commercial Banks (SCBs) registered a marginal increase, reaching 8.51 percent in May 2026, up from 8.50 percent in April.
Conversely, the WALR on outstanding rupee loans experienced a slight moderation, declining to 8.97 percent in May from 8.98 percent in the preceding month.
This divergence suggests varied pricing dynamics between new and existing credit.
The 1-Year median Marginal Cost of Funds based Lending Rate (MCLR), a key internal benchmark for banks, decreased to 8.50 percent in June 2026 from 8.65 percent in May, indicating some easing in banks' internal funding costs.
Both fresh and outstanding rupee loan WALRs showed mixed movements across sectors in May, reflecting diverse market conditions.
The proportion of External Benchmark based Lending Rate (EBLR) linked loans in total outstanding floating rate rupee loans continued to rise, reaching 67.6 percent by end-March 2026, up from 65.5 percent at end-December 2025.
Meanwhile, MCLR-linked loans declined to 30.2 percent from 32.0 percent, underscoring the increasing adoption of external benchmarks for loan pricing.
Deposit growth moderates
The weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits of SCBs increased to 5.84 percent in May 2026, up from 5.79 percent in April.
This upward movement for new deposits suggests banks are actively competing for fresh funding.
Conversely, the WADTDR on outstanding rupee term deposits moderated marginally to 6.57 percent in May 2026 from 6.59 percent in April.
This slight decline in the cost of existing deposits indicates banks are balancing overall funding expenses.
The mixed trends across both lending and deposit rates underscore the dynamic nature of the Indian banking sector's interest rate environment.
These movements are influenced by liquidity conditions and competitive pressures, impacting both borrowers and savers within the economy.
Subtle shifts, not a clear trend
The mixed movements in lending rates suggest a nuanced transmission of monetary policy, with some segments experiencing slight increases while others see marginal declines.
The moderation in outstanding deposit rates, alongside a slight rise in fresh deposit rates, indicates banks are balancing funding costs with the need to attract new deposits.
These data points reflect ongoing adjustments within the banking sector, but do not yet signal a definitive shift in the broader interest rate cycle.