Lending Rates Spike Faster than Deposit Rates in October ’2023: RBI

The bank lending rates witnessed an uptick sequentially at a faster pace compared to their deposit rates in October 2023, as per the Reserve Bank of India (RBI) data. 

While lending rates jumped to 12 basis points (bps), deposit rates surged to just 6 bps. The Weighted Average Lending Rate (WALR) on fresh rupee loans of commercial banks stood at 9.5% in October 2023, which was up from 9.38% in the previous month. 

Similarly, the WALR on outstanding rupee loans surged to 9.84% from 9.83% in September 2023. The one-year median Marginal Cost of Fund-based Lending Rate (MCLR) continued to retain its position at 8.7% in November 2023, as per the RBI.

With regard to deposits, the Weighted Average Domestic Term Deposit Rate (WADTDR) on outstanding rupee term deposits witnessed a spike to 6.75% in October 2023 from 6.69% in September 2023. The WADTDR on fresh rupee term deposits surged to 6.31% in October 2023 from 6.32% in September 2023.

The benchmark policy rates have seen an uptick by 250 bps ever since the central bank started pushing up the rates from May 2022 onwards. However, banks have not fully started transmitting these rates in the case of deposits or lending rates.

Among the two major bank groups, the public sector banks have transmitted comparatively more than private sector banks from May 2022 onwards. However, the overall transmission is merely about half the rate at which the apex bank raised rates.

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