Foreign Banks See Better Transmission Of Policy Actions Than Domestic Peers: RBI Bulletin

Foreign banks have witnessed a higher transmission of monetary easing than domestic peers in fresh and outstanding deposits and lending rates, according to the Reserve Bank of India's March bulletin released on Monday.

The data in the bulletin showed that foreign banks saw 1.06 per cent monetary transmission on outstanding deposits between February 2025 and January 2026, compared to 0.43 per cent for domestic private banks and 0.41 per cent for public sector banks.

Monetary transmission on fresh deposits for foreign banks was 1.10 per cent compared to 0.87 per cent and 0.88 per cent for private banks and public sector banks, respectively, as per the bulletin.

On the lending side as well, foreign banks dominated their peers in terms of transmission with 1.11 per cent on outstanding rupee loans against 0.88 per cent in private banks and 0.76 per cent for public sector banks.

On fresh loans, the transmission was higher at 1.48 per cent for foreign banks compared to 0.88 per cent and 0.54 per cent for private banks and public sector banks, respectively.

The central bank has so far reduced the repo rate by 1.25 per cent since last year, with 0.25 per cent each in the February and April monetary policies, 0.50 per cent in the June policy, and 0.25 per cent in the December policy. However, the central bank kept the rate unchanged in the August, October and February 2026 monetary policies.

During the current easing cycle from February 2025 to January 2026, the weighted average lending rates of scheduled commercial banks (SCBs) on both fresh and outstanding rupee loans decreased by 0.66 per cent and 0.83 per cent, respectively, the RBI bulletin said.

On the deposit side, interest rates on fresh term deposits have also fallen; however, pass-through to interest rates on outstanding deposits has been moderate.

As of February 28, the total outstanding credit to the commercial sector rose by 14.7 per cent, with non-bank sources registering a growth of 15.6 per cent.

In January 2026, non-food bank credit growth was well spread out across sectors, though some easing has been observed in agriculture and industry.

Within industries, lending to micro, small and medium enterprises (MSMEs) continued to improve. Services sector credit growth sustained its momentum, driven by robust bank lending to NBFCs and commercial real estate, despite a moderation in credit growth to trade and professional services segments.

The growth in personal loans was led by housing, gold and vehicle segments, the RBI bulletin said.