Deposit and lending rates have come down faster: RBI Guv Sanjay Malhotra
RBI Governor Sanjay Malhotra
| Photo Credit:
Bloomberg
Deposit and lending rates have come down significantly faster following the cumulative 100 basis points cut in the policy repo rate during the February-June 2025 period and comfortable liquidity in the banking system, said Reserve Bank of India (RBI) Governor Sanjay Malhotra. He also underscored the growth inducing impact of the lending rate cuts.
The Governor observed that comfortable liquidity in the banking system has reinforced transmission of the policy repo rate cuts to the money, bond and credit markets during the current easing cycle.
In the credit market, the weighted average lending rate (WALR) of scheduled commercial banks declined by 71 basis points (bps) for fresh rupee loans (of which 55 bps is due to interest rate reduction) and 39 basis points for outstanding rupee loans from February 2025 to June 2025.
Deposit side
On the deposit side, the weighted average domestic term deposit rate (WADTDR) on fresh deposits moderated by 87 bps during the same period. Moreover, the transmission to lending rates has been broad based across sectors, said Malhotra.
“As you are all aware, it [transmission of repo rate cuts] happens with a lag. This time, rates [deposit and lending rates] have of course come down significantly faster. The impact on the real economy will also start to happen. So, there is no reason to believe that this will not have a growth inducing impact,” he said at the post policy press meet.
To a question on slowdown in housing credit demand, the Governor said: “…I think, overall housing credit growth is at 14 per cent as we speak, which is very good. This is more than the average credit growth rate of about 10 per cent that we are having this year.”
system liquidity
Malhotra noted that system liquidity, as measured by the net position under the Liquidity Adjustment Facility (LAF), has been in surplus, on an average of ₹3.0 lakh crore per day since the last MPC, compared to an average daily surplus of ₹1.6 lakh crore in the previous two months.
Going ahead, as the CRR (cash reserve ratio) cut announced in the last policy comes into effect in a staggered manner beginning September, it would further support liquidity conditions.
Malhotra emphasised that the ability of the banks to fund corporates is not getting impeded due to shift in deposits to other investment avenues such as mutual funds and equities. Banks have sufficient funds to meet the needs of the economy, be it corporates, households, or government sector.
“There is certainly a shift from banking to equity, from debt to equity. I think that, on the whole, it’s a healthy trend for any economy. As it grows, there should be a good mix and, I think, we are moving towards that. We should not be unduly concerned about that,” he added.
Published on August 6, 2025
