India deposit rates at public sector banks fell more sharply than those at private lenders in September 2026, Reserve Bank of India data showed. Public banks cut their weighted average rate on fresh term deposits by 10 basis points to 6.10%, while private banks lowered theirs by six basis points to 5.76%.

Key Takeaways

  • Public banks still paid 34 basis points more on fresh deposits than private banks in September.
  • The systemwide weighted average rate on fresh rupee loans fell to 8.51% from 8.61% in August.
  • The median one-year MCLR fell in October, even as the RBI raised its repo rate.

India deposit rates diverge by bank group

The September cuts left public sector banks offering a higher average rate on fresh deposits than private banks. Across the banking system, the weighted average domestic term deposit rate on fresh deposits fell to 5.61% from 5.67% in August.

The longer-term picture was different: between June and September, private banks cut fresh deposit rates by 45 basis points, compared with 24 basis points at public lenders. The systemwide rate on outstanding term deposits edged down to 6.55% in September from 6.56% in August.

Fresh lending rates also eased

Public sector banks lowered their weighted average rate on fresh rupee loans to 7.93% in September from 7.99% in August. Private banks held their rate at 9.19%, while foreign banks reduced theirs to 7.76% from 7.98%.

The systemwide rate on outstanding rupee loans remained at 8.96% in September. The RBI’s lending-rate methodology explains that fresh and outstanding loan averages use different credit measures as weights, reflecting the distinction between newly sanctioned loans and the existing loan stock.

Compared with a year earlier, the systemwide fresh-loan rate rose to 8.51% from 8.39%, while the outstanding-loan rate fell to 8.96% from 9.26%.

October benchmark rate moved lower

The median one-year marginal cost of funds-based lending rate, or MCLR, for scheduled commercial banks declined to 8.55% in October from 8.61% in September. That decrease came even as the RBI raised its benchmark repo rate by 25 basis points to 5.50% earlier in October.

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