Reserve Bank of India Reports Lower Rates on Fresh Loans and Term Deposits

What was announced

The Reserve Bank of India published its October 2026 data on bank lending and deposit rates. The data covers scheduled commercial banks, leaving out small finance banks and regional rural banks.

According to the update, the weighted average lending rate on fresh rupee loans decreased by 10 basis points, dropping from 8.61 per cent in August 2026 to 8.51 per cent in September 2026. Rates on existing loans held steady. The weighted average lending rate on outstanding rupee loans stayed at 8.96 per cent in September 2026, matching August 2026 levels. Banks also lowered their 1-year median Marginal Cost of Funds based Lending Rate, a key benchmark for loan pricing, from 8.61 per cent in September 2026 to 8.55 per cent in October 2026.

Deposit rates dropped during the same period. The weighted average domestic term deposit rate on fresh rupee term deposits fell from 5.67 per cent in August 2026 to 5.61 per cent in September 2026. Rates on existing deposits saw a minor drop, with the average rate on outstanding rupee term deposits moving from 6.56 per cent to 6.55 per cent.

What it means

Borrowers taking out new rupee loans in September paid lower average interest rates than those who took loans in August. Banks also adjusted benchmark lending metrics downward for October.

At the same time, customers opening new term deposits in September received lower interest rates than in the previous month. Rates on older loans remained flat, meaning existing borrowers saw no change in their overall weighted average rate during September. The movement of rates across specific commercial sectors was mixed for both new and existing loans.

What the announcement does not tell us

The Reserve Bank of India release presents high-level average numbers without detailing individual bank rates. It does not list specific interest rates charged or offered by individual commercial lenders.

The release does not state why banks lowered their fresh lending and deposit rates. It provides no economic context or policy explanation for the shift.

Furthermore, the document notes that sector-specific interest rates moved in different directions, but it does not specify which sectors saw rate increases and which saw decreases. Finally, the figures exclude regional rural banks and small finance banks, so the data does not reflect borrowing or saving conditions at those institutions.