 "Banks credit growth")
As the policy rate has seen a steady increase since May 2022, the percentage of loans offered at interest rates below 8 per cent have declined sharply, dropping from 53 per cent in March 2022 to 18 per cent by June 2023, according to a report by the Reserve Bank of India (RBI).
The share of bank loans with interest rates of 10 per cent or higher rose from 22 per cent to 34 per cent during this period, reflecting the impact of a 250 basis point (bps) hike in the policy repo rate by the RBI's Monetary Policy Committee.
In response to the rise in repo rate, 32 domestic banks have made corresponding upward revisions to their repo-linked external benchmark-based lending rates (EBLRs), aligning them with the magnitude of the rate hike.
Additionally, the proportion of term deposits offering returns of 7 per cent and higher rose. As a result, the growth of term deposits gained momentum, whereas savings deposits showed a slowdown.
The report said that when considering the transmission of these changes across various bank groups from May 2022 to July 2023, it becomes evident that public sector banks exhibited greater increases in the weighted average domestic term deposit rates (WADTDR) for fresh rupee deposits and weighted average lending rates (WALR) for fresh rupee loans. On the other hand, private banks saw larger increases in the WADTDR for outstanding deposits and WALR for outstanding loans during the same period.
During the period of May 2022 to August 2023, there was an uptick of 155 basis points in the 1-year median marginal cost of funds-based lending rates (MCLRs) among Scheduled Commercial Banks (SCBs). Simultaneously, the WALR for both fresh and outstanding rupee loans saw increases of 193 basis points and 112 basis points, respectively, over the span from May 2022 to July 2023.
Regarding deposits, WADTDR for both fresh and outstanding deposits experienced increments of 232 basis points and 151 basis points, respectively, during the same period. In July 2023, SCBs raised their WALR for fresh rupee loans by 24 basis points, whereas the WADTDR for fresh deposits remained relatively stable.
The share of bank loans with interest rates of 10 per cent or higher rose from 22 per cent to 34 per cent during this period, reflecting the impact of a 250 basis point (bps) hike in the policy repo rate by the RBI's Monetary Policy Committee.
In response to the rise in repo rate, 32 domestic banks have made corresponding upward revisions to their repo-linked external benchmark-based lending rates (EBLRs), aligning them with the magnitude of the rate hike.
Additionally, the proportion of term deposits offering returns of 7 per cent and higher rose. As a result, the growth of term deposits gained momentum, whereas savings deposits showed a slowdown.
The report said that when considering the transmission of these changes across various bank groups from May 2022 to July 2023, it becomes evident that public sector banks exhibited greater increases in the weighted average domestic term deposit rates (WADTDR) for fresh rupee deposits and weighted average lending rates (WALR) for fresh rupee loans. On the other hand, private banks saw larger increases in the WADTDR for outstanding deposits and WALR for outstanding loans during the same period.
During the period of May 2022 to August 2023, there was an uptick of 155 basis points in the 1-year median marginal cost of funds-based lending rates (MCLRs) among Scheduled Commercial Banks (SCBs). Simultaneously, the WALR for both fresh and outstanding rupee loans saw increases of 193 basis points and 112 basis points, respectively, over the span from May 2022 to July 2023.
Regarding deposits, WADTDR for both fresh and outstanding deposits experienced increments of 232 basis points and 151 basis points, respectively, during the same period. In July 2023, SCBs raised their WALR for fresh rupee loans by 24 basis points, whereas the WADTDR for fresh deposits remained relatively stable.
