Loans priced below 9% jump to 62.4% after RBI rate cuts, shows data

RBI data shows a strong shift in lending patterns after policy easing, with loans priced below 9% rising sharply as PSBs led credit growth and monetary transmission became more visible

The Reserve Bank of India (RBI) said that after easing policy rates, the share of loans with interest rates ‘below 9 per cent’ increased from 42.2 per cent in December 2024 to 62.4 per cent in December 2025, reflecting a shift in the interest rate distribution of bank credit.

 

The RBI’s Monetary Policy Committee (MPC) has cut the benchmark interest rate by 125 basis points. The repo rate now stands at 5.25 per cent.

 

Public sector banks (PSBs) recorded 14.1 per cent year-on-year (YoY) credit growth for December 2025, exceeding the overall bank credit growth of 13.6 per cent. Credit growth in PSBs has consistently outpaced that of private sector banks (PVBs) in the last five quarters.

 

 

Bank branches located in rural, semi-urban, and urban centres recorded higher credit growth than metropolitan branches; their combined share in total credit increased to 40.4 per cent in December 2025 from 36.9 per cent in December 2020. Since December 2024, credit growth in metropolitan branches has remained lower than branches in other population groups.

 

Bank deposits grew by 10.5 per cent YoY as of end-December 2025, compared to 11 per cent a year ago and 9.9 per cent a quarter ago.

 

Deposit growth YoY related to public sector banks improved to 9.9 per cent in December 2025 as compared to 9.1 per cent last year, whereas deposit growth for private sector banks decelerated by 2.1 percentage points during the said period and stood at 11.3 per cent in December 2025.

 

Term deposits, the prime driver of deposit accumulation, recorded 11.5 per cent YoY growth in December 2025, outpacing the growth of current deposits, which grew by 11.1 per cent, and savings deposits, which recorded 8.3 per cent YoY growth.

 

“The transmission effects of the monetary easing phase were evident, as the share of term deposits offering interest rates of ‘less than 7 per cent’ rose to 56.3 per cent in December 2025 from 29.2 per cent a year ago,” the RBI said.

 

The transmission effects of the monetary easing phase were evident, as the share of term deposits offering interest rates of ‘less than 7 per cent’ rose to 56.3 per cent in December 2025 from 29.2 per cent a year ago.