February repo rate cut: Deposits rates inch up, lending rates fall

Despite a reduction in the policy repo rate in February, deposit rates of banks have inched up, while there was some cooling off for the lending rates, latest data released by the Reserve Bank of India (RBI) showed.

 

The weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits of scheduled commercial banks stood at 6.65 per cent in March 2025, compared to 6.49 per cent in February 2025, the RBI said. The WADTDR on outstanding rupee term deposits of SCBs was 7.03 per cent in March 2025, compared to 7.02 per cent in February 2025.

 

The six-member Monetary Policy Committee of the RBI reduced the policy repo rate by 25 basis points in February to 6.25 per cent. The repo rate was cut by another 25 basis points in April.

 

On the loan side, the weighted average lending rates (WALRs) for fresh rupee loans of banks dropped to 9.35 per cent in March from 9.40 per cent in February, while rates on outstanding loans declined to 9.77 per cent from 9.80 per cent in February 2025.

 

Additionally, the one-year median marginal cost of funds-based lending rate (MCLR) for banks dropped to 9 per cent from 9.05 per cent in February 2025.

 

“On the lending side, it is linked to external benchmarks and we have seen domestic yields across the curve come down. I think that is getting transmitted on the lending side. On the deposit side, liquidity conditions have improved from where we were at the beginning of February. Now, we have moved to surplus liquidity over the last few weeks, which is likely to enable transmission on the deposits side,” said Sakshi Gupta, principal economist, HDFC Bank.

 

The RBI has been infusing liquidity into the banking system since mid-January, with the aim of improving monetary transmission. While effective transmission of rates typically takes two quarters, the central bank is keen on faster transmission.