Weighted avg rate on fresh bank loans up 19 bps on-mo to 7.99% Jul

By Staff Reporter: After falling for two consecutive months, the weighted average lending rate on new bank loans increased by 19 basis points on-month to 7.99% in July, according to data released by the Reserve Bank of India today.

In the previous month, the lending rates had fallen by 1 bps month-on-month to 7.80%. The rates had previously witnessed an increase of 6 bps in April to 8.10%.

Within banking groups, the private sector banks' lending rates rose by 35 bps on-month to 8.64%, followed by private banks at 21 bps to 5.96%. The lending rates of public sector banks were at 7.69% in July, up 3 bps.

During July, some private banks had increased their marginal cost of fund-based lending rates for the month.

Till June, banks had cut rates on new loans for customers by 146 bps since Mar 2020, when the COVID-19 pandemic took hold. This was higher than the 115-bps cut in the RBI's repo rate since then.

However, the total reduction was only 127 bps since Mar 2020, following a rise in July, and now is 12 bps more than the central bank's reduction in repo rate.

The central bank had initially cut the repo rate by 75 basis points on Mar 27, 2020, and then by another 40 basis points to 4.0% on May 22 that year, as part of its effort to insulate the economy from the pandemic-led disruption.

The weighted average lending rate on outstanding bank loans fell by 1 bps to 9.09% in July, RBI data showed.

The data also showed that the marginal cost of funds-based lending rate of banks remained flat on month to 7.25% in August. These numbers are based on the benchmark one-year MCLR and are calculated as a median of the lending rates of all banks.

The MCLR for public sector banks remained unchanged at 7.30% in August from a month ago.

On the other hand, MCLR for private banks fell by 2 bps on month to 8.23%. It, however, rose 1 bps to 5.86% in case of foreign banks.

Source : Eureka

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