Fresh loan rates start hardening

BANKS ADJUST PRICING TO BALANCE LIQUIDITY & MARGINS

- MAHESH NAYAK

IN A SIGN that lenders are adopting a more cautious approach towards loan pricing, rates across the board have been on the rise in the past couple of months.

As a result, they are recalibrating their lending strategies by increasing markups on new loans, a move driven by the need to protect margins amid shifting interest rate dynamics.

While weighted average lending rates on outstanding rupee loans continued their downward glide from 9.67% in May to 9.38% in July, the fresh rupee loans sawa reversal. After bottoming out at 8.62% in June, fresh lending rates edged up to 8.80% in July, signalling a hardening stance among banks towards new credit disbursement.

Subsequently, the weighted average domestic term deposit rates have declined at a slower pace. For fresh deposits, rates fell from 6.11% in May to 5.61% in July, while outstanding deposit rates slipped modestly from 7.07% to 6.92%.

This lag in deposit rate adjustment points to banks’ need to retain stable funding sources even as they attempt to manage margins.