Banks paid less on fresh term deposits in August while simultaneously raising lending rates, creating a 27 basis points gap between the two rates. According to RBI data reported by The Economic Times, the weighted average rate on fresh rupee term deposits fell 18 basis points to 5.67% in August from 5.85% in July, while the weighted average lending rate on fresh rupee loans rose nine basis points to 8.61% from 8.52%. This divergence has widened since March, when banks raised deposit rates sharply, with the average rate on fresh deposits falling 40 basis points from 6.07% while fresh loan rates increased 21 basis points from 8.40.
Both public and private sector banks experienced similar trends in deposit rates, with public sector banks seeing a 15 basis points decline to 6.20% and private banks falling 14 basis points to 5.82%. As reported by The Economic Times, the increase in fresh lending rates was concentrated at private banks, where the average rose 10 basis points to 9.19%, while public sector banks saw a marginal one basis point increase to 7.99%. The one-year median marginal cost of funds-based lending rate also declined to 8.61% in September 2026 from 8.70% in August 2026.
The rise in lending rates was not uniform across borrower categories, with personal loans experiencing the most significant increases. According to The Economic Times, the average rate on fresh other personal loans increased 17 basis points to 10.41% in August, while education loan rates rose 16 basis points to 9.30%. In contrast, fresh vehicle loan rates fell 19 basis points to 9.57%, and housing loan rates eased two basis points to 7.61%. The share of external benchmark-based lending rate (EBLR)-linked loans in total outstanding floating-rate rupee loans was 68.2% at the end of June 2026, while MCLR-linked loans comprised 29.6%.
Rates on existing business moved only marginally, with the weighted average rate on outstanding loans declining one basis point to 8.96% in August, while the rate on outstanding term deposits fell two basis points to 6.56%. As reported by The Economic Times, the 8.96% rate on outstanding loans reflects the average pricing of rupee loans already on banks' books, while the 6.56% WADTDR on outstanding deposits reflects the average rate associated with the existing stock of term deposits. The 8.61% rate on fresh loans relates to lending newly sanctioned during the relevant period, showing slight easing from the previous month's levels.
