India Bank Lending Rates Mixed, Deposits Cheaper in August
The Reserve Bank of India reported varied movements in commercial bank lending rates for August 2026, with outstanding loan rates easing slightly while fresh loan rates edged up. Deposit rates concurrently declined.
Lending Rates Show Mixed Trends
India's scheduled commercial banks (SCBs) saw a mixed picture in lending rates during August 2026, the Reserve Bank of India (RBI) reported. The weighted average lending rate (WALR) on existing rupee loans eased marginally to 8.96 per cent, down from 8.97 per cent in July 2026.
Conversely, the WALR on new rupee loans increased, reaching 8.61 per cent in August 2026 compared to 8.52 per cent the previous month. This mixed movement was observed across various sectors, indicating varied credit conditions for businesses and individuals seeking new or existing financing.
Key Lending Benchmarks Shift
The 1-Year median Marginal Cost of Funds based Lending Rate (MCLR) for SCBs also saw a decline, falling to 8.61 per cent in September 2026 from 8.70 per cent in August 2026, the RBI data showed. This benchmark is crucial for many floating rate loans.
Furthermore, the share of External Benchmark based Lending Rate (EBLR) linked loans continued to grow, accounting for 68.2 per cent of total outstanding floating rate rupee loans at the end of June 2026, up from 67.6 per cent at the end of March 2026. MCLR-linked loans represented 29.6 per cent of the total by June 2026, down from 30.2 per cent three months prior.
Deposit Costs Decline
Deposit rates for rupee term deposits also decreased in August 2026, according to the RBI. The weighted average domestic term deposit rate (WADTDR) on outstanding rupee term deposits for SCBs declined to 6.56 per cent, from 6.58 per cent in July 2026.
Similarly, the WADTDR on fresh rupee term deposits saw a more significant drop, settling at 5.67 per cent in August 2026 compared to 5.85 per cent in July 2026. These movements suggest a reduction in the cost of funds for commercial banks.
The slight easing in overall outstanding loan rates could offer some relief for businesses with existing credit lines in India. However, the rise in fresh loan rates indicates that new borrowing costs are increasing for companies. The declining deposit rates suggest that banks' funding costs may be falling, potentially improving their net interest margins.
Businesses considering new capital expenditure or expansion plans will need to factor in these higher fresh loan rates, while the shift towards EBLR-linked loans means that future rate changes will more directly reflect the RBI's policy actions.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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