Lending rates of scheduled commercial banks (SCBs) in India continued their downward trend in May 2025, aligning with the Reserve Bank of India’s (RBI) recent monetary policy easing, according to official data.
The weighted average lending rate (WALR) on fresh rupee loans fell to 9.20% in May, down from 9.26% in April, as per the RBI’s latest figures. Similarly, the WALR on outstanding rupee loans declined marginally to 9.69%, from 9.70% in the previous month.
The 1-year median Marginal Cost of Funds-based Lending Rate (MCLR) also moderated to 8.90% in June, compared to 8.95% in May, indicating broader transmission of policy rate cuts by commercial banks.
As of end-March 2025, External Benchmark-based Lending Rate (EBLR)-linked loans constituted 61.6% of total outstanding floating rate rupee loans, up from 60.6% at end-December 2024. In contrast, the share of MCLR-linked loans declined slightly to 34.9% from 35.9%.
On the deposit side, the Weighted Average Domestic Term Deposit Rate (WADTDR) on fresh rupee term deposits dropped to 6.11% in May, from 6.34% in April. For outstanding term deposits, the WADTDR eased to 7.07%, compared to 7.10% a month earlier.
This softening of both lending and deposit rates reflects the banking system’s response to the RBI’s 100 basis point repo rate cut since February 2025, aimed at reviving credit growth and stimulating the economy.
According to economists, the rate cuts are expected to boost loan affordability and spur demand for fresh credit, aiding economic recovery amid signs of moderation in growth.
However, the scope for further rate reductions may be limited, as noted by RBI Governor Sanjay Malhotra during the central bank’s most recent policy review.
