Lending rates fall some more, private banks lead push

ET BureauLast Updated: Mar 31, 2026, 06:53:00 AM IST

Synopsis

Fresh rupee loan rates dipped in February, with private banks leading the decline. However, public sector banks increased their lending rates. The easing on outstanding loans has been slower, despite significant repo rate cuts by the RBI over the past year.

Mumbai: Average lending rates on fresh rupee loans eased further in February, with the weighted average lending rate (WALR) declining five basis points from January to 8.44%, latest Reserve Bank of India (RBI) data showed. The movement was uneven across bank categories. Private sector banks led the easing, cutting fresh loan rates by 16 basis points sequentially to 9.16%, while foreign banks reduced rates by 10 basis points to 7.71%.

Public sector banks, however, moved in the opposite direction, raising fresh lending rates by nine basis points to 7.84%, due to much lower median rates. On outstanding loans, the transmission has been more gradual. The system-wide WALR on outstanding rupee loans fell just four basis points to 9.00% from 9.04% in January 2026.

Private sector banks reduced outstanding loan rates by six basis points to 9.91%, while public sector banks were broadly flat at 8.40% versus 8.41% in January. The modest pass-through on outstanding loans comes despite the RBI having cut the repo rate by a cumulative 125 basis points over the past year.

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