​Lending rates rise faster than deposit rates in October

Bank lending rates rose sequentially at a faster pace than their deposit rates in October,data released by RBI indicates. While lending rates rose up to 12 bps, deposit rates were up only 6 bps.

The weighted average lending rate (WALR) on fresh rupee loans of commercial banks was at 9.50 per cent in October, up from 9.38 percent in September this year . At the same time the WALR on outstanding rupee loans moved to 9.84 per cent from 9.83 percent in September 2023.

One year median Marginal Cost of Fund based Lending Rate (MCLR) remained unchanged at 8.70 per cent in November, RBI said .

On the deposit side, the weighted average domestic term deposit rate (WADTDR) on outstanding rupee term deposits went up to 6.75 percent in October 2023 from 6.69 percent in September 2023. The weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits moved to 6.31 per cent in October 2023 from 6.32 per September 2023.

The benchmark policy rates have risen by 250 bps ever since the Reserve Bank started raising rates since May 2022. But banks have not fully started transmitting these rates to either deposits or lending rates.

Between the two major bank groups, the public sector banks have transmitted more than private sector banks since May. But the overall transmission is just about half the rate at which the central bank raised rates.