Bank deposit rates fall as fresh lending rates rise in August

Mumbai: Banks paid less on fresh term deposits in August even as the average rate on new loans rose, widening the gap between the two rates by 27 basis points in a month, Reserve Bank of India data showed. One basis point is one-hundredth of a percentage point.The weighted average rate on fresh rupee term deposits fell 18 basis points to 5.67% in August from 5.85% in July. The weighted average lending rate on fresh rupee loans rose nine basis points to 8.61% from 8.52%.Both public and private sector banks paid less for new deposits. The average rate at public sector banks declined 15 basis points to 6.20%, while that at private banks fell 14 basis points to 5.82%.The increase in fresh lending rates was concentrated at private banks, where the average rose 10 basis points to 9.19%. It edged up one basis point to 7.99% at public sector banks.The divergence has widened since March, when banks raised deposit rates sharply. The average rate on fresh deposits has fallen 40 basis points from 6.07% in March, while the average rate on fresh loans has risen 21 basis points from 8.40%.The rise in lending rates was not uniform across borrowers. The average rate on fresh other personal loans increased 17 basis points to 10.41% in August, while that on education loans rose 16 basis points to 9.30%. Fresh vehicle loan rates, however, fell 19 basis points to 9.57%, while housing loan rates eased two basis points to 7.61%.Rates on existing business moved only marginally. The weighted average rate on outstanding loans declined one basis point to 8.96% in August, while the rate on outstanding term deposits fell two basis points to 6.56%. Separately, the one-year median marginal cost of funds-based lending rate declined to 8.61% in September from 8.70% in August.The share of external benchmark-based lending rate (EBLR)-linked loans in total outstanding floating-rate rupee loans of banks was 68.2% at the end of June 2026, while that of MCLR-linked loans was 29.6%.