Money bag with coins and up arrow. The concept of a successful business. Increase profits and capital. Budget and Revenue Growth. Rupee, rupiah
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Andrii Yalanskyi
Scheduled commercial banks (SCBs) are gradually increasing the interest rates on fresh term deposits and loans amid wide gap between credit and deposit growth. .The weighted average domestic term deposit rate (WADTDR) of SCBs on fresh rupee term deposits rose 16 basis points (bps) to 5.99 per cent in June 2026 (5.83 per cent in May 2026), per latest RBI data.The WADTDR on fresh rupee term deposits in June 2026 is up 20 basis from 5.79 per cent in April 2026.The WADTDR on outstanding rupee term deposits increased marginally to 6.58 per cent in June 2026 from 6.57 per cent in May 2026.The weighted average lending rate (WALR) on fresh rupee loans of SCBs nudged up to 8.53 per cent in June 2026 (8.51 per cent in May 2026).The WALR on outstanding rupee loans of SCBs declined marginally to 8.96 per cent in June 2026 from 8.97 per cent in May 2026.Growth gapThe gap between year-on-year (yoy) credit growth 18.38 per cent) and deposit growth (13.22 per cent) as at June 30, 2026 stood at 516 basis points.However, the situation was different as on June 27, 2025, with credit growth (8.84 per cent) lagging deposit growth (9.46 per cent).To deal with the asymmetric credit and deposit growth, banks have also upped the one-year median marginal cost of funds based lending rate (MCLR) to 8.60 per cent in July from 8.50 per cent in June.V Rama Chandra Reddy, Head – Treasury, Karur Vysya Bank, observed that fresh term deposit rates of SCBs rose sharply in June, reflecting aggressive liability mobilisation during the Q1 (April-June 2026 quarter) balance sheet build up.Deposit ratesHe said the increase was more pronounced among private sector banks, where fresh deposit rates climbed to 6.21 per cent from 5.94 per cent, driven by intense competition for bulk deposits in June.Reddy opined that the cost of outstanding term deposits has largely bottomed out at around 6.58 per cent for SCBs (6.7 per cent for private banks) signalling that the repricing benefit is nearing its end.“Looking ahead, Q2 (July-September 2026 quarter) is likely to witness renewed upward pressure on deposit costs. Strong mobilisation under the FCNR B scheme, continued reliance on term deposits amid subdued CASA growth and sustained competition for liabilities are expected to increase the share of higher cost incremental deposits,” he said.Consequently, the repricing gains enjoyed over recent quarters are likely to fade with banks facing a gradual firming in their overall cost of deposits. This is also reflected in the gradual hardening of banks 1 year MCLR rate.Published on July 31, 2026
