RBI Data Shows Commercial Banks Fresh Lending Rate Eased to 8.51% and Median MCLR Fell to 8.55%
Fresh borrowing and savings costs across India's banking sector registered a modest easing heading into the festival season, according to the latest statistical release on lending and deposit rates published by the Reserve Bank of India (RBI).
The central bank's data covering scheduled commercial banks (SCBs)—excluding regional rural banks and small finance banks—showed that while rates on existing portfolios held steady, incremental credit and deposit rates drifted lower across several key categories.
Fresh Borrowing Rates Edge Lower
The weighted average lending rate (WALR) on fresh rupee loans sanctioned by commercial banks dropped by 10 basis points to 8.51% in September 2026, compared with 8.61% recorded in August 2026.
In contrast, loan servicing costs on legacy portfolios remained unchanged, reflecting the lag with which benchmark revisions permeate long-tenor advances. The WALR on outstanding rupee loans stood flat at 8.96% in September 2026, matching August levels.
Banks also trimmed their internal cost-based benchmarks. The 1-year median Marginal Cost of Funds based Lending Rate (MCLR) of scheduled commercial banks declined to 8.55% in October 2026 from 8.61% in September 2026. Across distinct borrowing categories, the RBI noted that WALR on both fresh and outstanding rupee loans exhibited mixed movements across different economic sectors.
Deposit Costs Begin to Moderate
On the liability side, lenders saw a parallel reduction in deposit acquisition expenses. The weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits slipped to 5.61% in September 2026, down from 5.67% in August 2026.
Longer-tenor outstanding deposit rates showed negligible movement, as previously locked-in retail fixed deposits continue to mature gradually.
Key Interest Rate Metrics at a Glance:
- WALR on Fresh Rupee Loans: Declined to 8.51% in September 2026 from 8.61% in August 2026.
- WALR on Outstanding Rupee Loans: Remained steady at 8.96% in September 2026.
- 1-Year Median MCLR: Eased to 8.55% in October 2026 from 8.61% in September 2026.
- WADTDR on Fresh Term Deposits: Dropped to 5.61% in September 2026 from 5.67% in August 2026.
- WADTDR on Outstanding Term Deposits: Edged down marginally to 6.55% in September 2026 from 6.56% in August 2026.
Implications for Indian Markets and Savers
The simultaneous softening in fresh loan pricing and term deposit rates carries meaningful implications for market participants tracking the Nifty Bank and broader financial services space:
Net Interest Margin (NIM) Trajectory: Throughout the preceding quarters, Indian banks grappled with elevated deposit repricing that pressurized net interest margins. A deceleration in fresh deposit rates gives asset-liability management desks breathing room to defend margins, even as fresh lending yields face competitive softening.
Credit Demand and Retail Borrowers: With the median 1-year MCLR ticking downward to 8.55%, borrowers with MCLR-linked home, vehicle, and working capital loans can expect lower resets in upcoming reset cycles. This easing could provide timely support to retail consumption and corporate working capital demand.
Savers and Debt Allocation: For retail fixed-deposit investors, the trim in fresh term deposit yields highlights a peak in nominal returns, likely prompting yield-seeking retail flows to diversify further into equity mutual funds, sovereign debt, and corporate bonds.
