The RBI has lowered the repo rate by a cumulative 125 basis points since February 2026, but fresh business is showing a different pricing trend. Governor Sanjay Malhotra said transmission—the process through which policy changes reach customer rates—had lost pace as credit demand kept rates firm.

The weighted average rate for newly accepted domestic term deposits increased 16 basis points during June, against a four-basis-point increase in May. One basis point equals 0.01 percentage point. The sharper rise points to stronger competition among banks for deposits to fund lending.

For fresh rupee loans, the weighted average lending rate edged up two basis points in June. However, the one-year MCLR, a lending benchmark linked to banks’ funding costs, declined 15 basis points. These contrasting movements show that lending-rate measures did not move uniformly.

By late July 2026, bank credit was growing 19.3 per cent year on year, while deposit growth stood at 15.4 per cent. Retail borrowers and service businesses continued to draw credit, with MSMEs and large industries also borrowing more. Agricultural lending remained steady.

The report also highlighted differences between bank groups. Private lenders passed rate changes through to loan customers faster, while public sector lenders recorded stronger transmission on deposits. The gap between credit and deposit growth makes funding availability and margin management important watchpoints.