PSBs slashed rates more than private peers

But loan growth remains moderate

- MANOJIT SAHA

Following the 100 basis points (bps) cut in the policy repo rate since February this year, India's public-sector banks have lowered their lending and deposit rates more than their private-sector counterparts, data released by the Reserve Bank of India on Wednesday showed.

The decline in the weighted average lending rates of fresh rupee loans by the public sector banks was 31 bps till May, while that for private banks was 20 bps. Foreign banks saw a sharper decline of 49 bps (See table). For fresh deposits, the interest rates offered by PSBs fell 47 bps as compared to 41 bps by private banks.

The six-member rate-setting panel has cut the policy repo rate by 50 bps between February and May. In June, the rate was further reduced by 50 bps. One bp equals 0.01 per cent.

"During the current easing cycle (February-May 2025), the decline in weighted average lending rates on both fresh and outstanding rupee loans was higher for Public Sector Banks (PSBs) as compared to Private Sector Banks (PVBs)," an article on the state of the economy in RBI's July bulletin said.

"In response to the 100-bps reduction in the policy repo rate since February 2025, banks have adjusted their repo-linked external benchmark based lending rates downward by 100 bps and marginal cost of funds-based lending rate by 10 bps," it said.