Average lending rates on fresh rupee loans rose 39 basis points in January from the previous month, with the weighted average lending rate (WALR) increasing to 8.67% from 8.28% in December, according to latest central bank data reported by The Economic Times. The rise was primarily driven by state-run banks, which saw their WALR increase by 44 basis points to 8.05%, while private sector banks recorded an 18-basis point increase to 9.32%. This represents a significant shift in the lending landscape, with state banks leading the rate adjustments while private sector banks maintained more conservative pricing strategies.
The rate increase occurred against the backdrop of the Reserve Bank of India's monetary policy, which has reduced its repo rate by 125 basis points to 5.25% over the course of 2025, as reported by The Economic Times. In contrast, the WALR on outstanding rupee loans of commercial banks declined marginally to 9.04% in January 2026 from 9.06% in December 2025, indicating that the rate increases were primarily affecting new loan disbursements rather than existing borrowers. The policy environment continues to support lending growth despite the recent rate adjustments.
The one-year median Marginal Cost of Funds-based Lending Rate (MCLR) increased to 8.45% in February 2026 from 8.40% in January 2026, according to The Economic Times. Meanwhile, the weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits stood at 5.66% in January 2026, slightly lower than 5.67% in December 2025. The WADTDR on outstanding rupee term deposits declined to 6.64% in January 2026 from 6.68% in the previous month, reflecting the ongoing pressure on deposit rates across the banking sector.