The gap between year-on-year credit growth of 18.38% and deposit growth of 13.22% as of June 30, 2026, stood at 516 basis points, representing a significant shift from the previous year when credit growth lagged at 8.84% while deposit growth was 9.46% as of June 27, 2025. According to The Hindu BusinessLine, this asymmetric credit and deposit growth is driving banks to gradually increase interest rates on fresh term deposits and loans to manage liquidity pressures. The weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits of SCBs rose 16 basis points to 5.99% in June 2026 from 5.83% in May 2026, and increased 20 basis points from 5.79% in April 2026. The WALR on outstanding rupee loans of SCBs also declined marginally to 8.96% in June 2026 from 8.97% in May 2026.
Private-sector banks led the increase in fresh term deposit rates, raising their average rate by 27 basis points to 6.21% from 5.94% in May, according to The Economic Times. Public-sector banks increased rates by 7 basis points to 6.40%, though their average deposit rate remained higher than private bank offerings. The weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits of SCBs increased to 5.99% in June 2026 from 5.83% in May 2026, with the 1-Year median Marginal Cost of Funds based Lending Rate (MCLR) of SCBs standing at 8.60% in July 2026, up from 8.50% in June 2026. The WADTDR on outstanding rupee term deposits of SCBs also increased marginally to 6.58% in June 2026 from 6.57% in May 2026.
Latest data from the Reserve Bank of India (RBI) confirmed the upward trajectory in bank rates, with fresh term deposit rates rising 16 basis points in June and lending rates on new rupee loans edging higher. The weighted average lending rate (WALR) on fresh rupee loans increased by 2 basis points to 8.53% from 8.51% during the same period, as reported by Business Standard. The six-member Monetary Policy Committee (MPC) has kept the repo rate unchanged at 5.25% for the past three policy meetings, maintaining the current monetary policy stance while banks continue to adjust their lending and deposit rates independently. The one-year median MCLR rate increase reflects banks' efforts to deal with the asymmetric credit and deposit growth and rising funding costs.
Looking ahead, Q2 (July-September 2026) is likely to witness renewed upward pressure on deposit costs, according to Reddy from Karur Vysya Bank. Strong mobilisation under the FCNR B scheme, continued reliance on term deposits amid subdued CASA growth and sustained competition for liabilities are expected to increase the share of higher cost incremental deposits. The cost of outstanding term deposits has largely bottomed out at around 6.58% for SCBs (6.7% for private banks), signalling that the repricing benefit is nearing its end. Private sector banks have seen more pronounced increases, with fresh deposit rates climbing to 6.21% from 5.94%, driven by intense competition for bulk deposits in June. This competitive pressure is expected to continue, with banks facing gradual firming in their overall cost of deposits.
