Bank Lending Rates Show Mixed Movement In August, Deposit Rates Ease

The cost of borrowing from scheduled commercial banks moved in different directions in August 2026, with fresh loan rates rising while rates on outstanding loans edged lower. The weighted average lending rate (WALR) on outstanding rupee loans slipped to 8.96 per cent in August from 8.97 per cent in July, according to data released by the Reserve Bank of India (RBI) on September 30, 2026.

For fresh rupee loans, however, the WALR climbed to 8.61 per cent from 8.52 per cent in July. The movement indicates that the rates applied to new borrowing did not follow the same direction as rates on existing loans.

One-Year MCLR Moves Lower

The one-year median marginal cost of funds-based lending rate (MCLR) of scheduled commercial banks (SCBs) fell to 8.61 per cent in September from 8.70 per cent in August. MCLR is an internal benchmark used by banks to price certain floating-rate loans. The one-year rate is relevant for borrowers whose loans are linked to this benchmark, depending on the terms of their loan agreements.

The RBI data also showed differing movements across sectors for both fresh and outstanding rupee loans during August. This means borrowing costs did not move uniformly across all categories of bank credit.

External Benchmark-Linked Loans Gain Share

The composition of floating-rate bank loans also shifted during the April-June quarter. The share of external benchmark-linked loans in total outstanding floating-rate rupee loans rose to 68.20 per cent at the end of June, as against 67.60 per cent at the end of March.

At the same time, the proportion of MCLR-linked loans dropped to 29.60 per cent from 30.20 per cent.

External benchmark-linked loans are tied to an outside reference rate, such as the RBI repo rate or another benchmark specified by the lender. Changes in the benchmark can affect the rate of interest applicable to borrowers, subject to the loan’s reset terms.

Deposit Rates Also Move Lower

Rates offered on bank term deposits also declined during August. The weighted average domestic term deposit rate (WADTDR) on outstanding rupee term deposits fell marginally to 6.56 per cent in August from 6.58 per cent in July.

The decline was more pronounced for fresh rupee term deposits. The WADTDR for new deposits fell to 5.67 per cent in August from 5.85 per cent in the previous month.

The data, therefore, points to a mixed movement across borrowing and deposit rates, with fresh loan rates moving higher while rates on outstanding loans and new term deposits moving lower during the month.