Public sector banks (PSBs) saw faster transmission of rates with lending rates falling 56 bps month-on-month to 7.82% while rates of private sector banks fell 41 basis points to 9.74% in June, according to provisional data from the Reserve Bank of India (RBI) released on Thursday.
This was the second month in a row that transmission by PSBs was higher than its private sector counterparts. In March and April, rate transmission by private sector banks had been faster than PSB, at 0.08 bps and 0.24 bps on month (See table).
WALR
Overall, the weighted average lending rate (WALR) on fresh rupee loans of scheduled commercial banks fell 58 basis points to 8.62% in June – the biggest drop since the beginning of the rate cut cycle by the RBI in February. In all, the lending rates have fallen by 78 bps for scheduled commercial banks since February while the RBI has cut repo rates to the tune of 100 basis points.
The lending rates of foreign banks for fresh rupee loans have also been falling steadily. In June, it fell 51 bps on month.
In the case of deposits, rates of private sector banks fell more than public sector banks. Private sector banks’ deposit rates fell by 37 basis points on month to 5.92%, while public sector banks rates fell by 36 basis points on month to 6.23%.
Fresh rupee term deposit rates of foreign banks fell 33 basis points on month and stood at 4.86% in June. For outstanding rupee term deposits, the weighted average domestic term deposit rate for scheduled commercial banks was 6.99% in June as compared to 7.07% a month ago.
WADR
The weighted average domestic term deposit rate on fresh rupee term deposits of scheduled commercial banks stood at 5.75% in June as compared to 6.11% in May. Since February, the deposit rates for scheduled commercial banks have fallen by 80 basis points.
At the FE BSFI Summit a fortnight back, RBI Governor Sanjay Malhotra said, “I’m pleased to note that policy transmission is happening, which will support growth. For example, preliminary figures for June show that rates on new loans have dropped by at least 50 bps, reflecting full transmission of our earlier cuts.”
He further added that ‘whatever the MPC did stands validated, in terms of much faster transmission. “Coming to the fact that whether we have anything left after having done all this, it would depend on what the requirement is. We believe that we have enough ammunition in our armoury,” he added.