Foreign banks exhibit strongest rate transmission: RBI Bulletin

Foreign banks led the transmission of RBI's rate cuts, reducing lending and deposit rates more sharply than public and private sector peers, the central bank's bulletin said

Foreign banks have exhibited the strongest transmission of the Reserve Bank of India's policy easing during the current rate-cut cycle, lowering both lending and deposit rates more sharply than their public and private sector peers, according to the RBI's bulletin.

In its monthly bulletin released on Wednesday, the RBI said that during the easing cycle between February 2025 and May 2026, scheduled commercial banks (SCBs) reduced repo-linked external benchmark-based lending rates (EBLR) and marginal cost of funds-based lending rates (MCLR), with pass-through to fresh lending rates remaining particularly strong in infrastructure and other EBLR-mandated sectors.

The bulletin showed that foreign banks cut weighted average lending rates (WALR) on fresh rupee loans by 1.24 percentage point, compared with 1.08 percentage point by private banks and 0.66 per cent by public sector banks.

 

For outstanding rupee loans, foreign banks again led transmission with a 1.20 percentage point reduction, followed by private banks at 0.98 percentage point and public sector banks at 0.81 percentage point.

The sharper transmission was also visible on the deposit side. Foreign banks reduced weighted average domestic term deposit rates (WADTDR) on fresh deposits by 0.91 percentage point, compared with 0.74 percentage point by private banks and 0.73 percentage point by public sector banks.

For outstanding deposits, foreign banks cut rates by 0.90 percentage point, significantly higher than private banks with 0.46 percentage point and public sector banks with 0.53 percentage point.

The central bank has so far reduced the repo rate by 1.25 percentage points since last year, with 0.25 percentage points each in the February and April monetary policies, 0.50 percentage points in the June policy, and 0.25 percentage points in the December policy..

However, the central bank kept the rate unchanged in the August, October and February 2026 monetary policies.