Mumbai: Deposit rates across India's banking system fell sharply in April 2026, with the weighted average rate on fresh rupee term deposits declining 30 basis points to 5.77% from 6.07% in March 2026, one of the steepest monthly drops, as banks moved aggressively to reprice their liability books to protect margins, RBI data showed.Both public and private sector banks led the repricing. Public sector banks cut fresh deposit rates by 27 basis points to 6.18%, while private sector banks reduced rates by 29 basis points to 5.97%.The transmission to outstanding deposits, however, remains gradual. The weighted average rate on outstanding rupee term deposits declined only marginally to 6.59% in April from 6.62% in March, as a large share of term deposits contracted at higher rates continue to reprice with a lag.Average interest rates on fresh rupee loans rose 10 basis points to 8.50% in April 2026 from 8.40% in March. Private sector banks raised fresh lending rates by 7 basis points to 9.19%, while public sector banks increased rates by 3 basis points to 7.87%. Foreign banks bucked the trend, cutting fresh lending rates by 7 basis points to 7.78%.The gap between falling deposit rates and rising fresh lending rates suggests banks are attempting to rebuild net interest margins that have been under pressure from the RBI's cumulative 125 basis point repo rate cut cycle over the past year. The weighted average rate on outstanding rupee loans was broadly flat at 8.98% in April versus 8.99% in March.The one-year median MCLR of banks rose to 8.65% in May 2026 from 8.55% in April — a counterintuitive move that suggests some lenders are not yet fully passing on the benefit of policy rate cuts to borrowers on MCLR-linked loans, even as they aggressively cut deposit rates.The combination of falling deposit rates and sticky or rising lending rates is likely to support net interest margin recovery for banks in the April quarter, even as it raises questions about the pace and equity of monetary policy transmission to end borrowers.