The proportion of Scheduled Commercial Banks’ (SCBs) loans bearing interest rate of less than 9 per cent rose sharply in FY26 to 64.2 per cent as on end-March 2026 from 43.9 per cent a year ago in sync with the easing cycle, according to the RBI.

The RBI noted that in response to the cumulative 125 bps reduction in the policy repo rate (from 6.50 per cent to 5.25 per cent), SCBs adjusted both repo-linked external benchmark-based lending rates (EBLRs) and marginal cost of funds-based lending rates (MCLR) downward during February 2025 to March 2026.

“The pass-through to weighted average lending rates (WALRs) has been robust during the ongoing easing cycle. The transmission to lending rates on fresh and outstanding loans has been broad-based across sectors,” per the RBI’s latest monthly bulletin.

The transmission of the repo rate cuts to External Benchmark-based Lending Rate (EBLR)-linked new floating rate personal or retail loans (housing, auto, etc.) and floating rate loans to micro, small and medium enterprises extended by banks has been one-to-one.

PSU Banks

The transmission of the repo rate cuts to loans linked to the Marginal Cost of Funds-based Lending Rate (MCLR) has been gradual, with the weighted average lending rate on fresh and outstanding rupee loans declining 93 bps and 88 bps, respectively.

Public sector banks recorded higher credit growth than the headline credit growth of 14.1 per cent as on end-March 2026. Bank credit growth (year-on-year/y-o-y) increased to 14.1 per cent as on end-March 2026 from 11.1 per cent a year ago.

Private sector banks witnessed an increase in credit growth (y-o-y) to 12.3 per cent (lower than the banking system’s credit growth of 14.1 per cent) as on end-March 2026 from 9.5 per cent a year earlier.

“Small finance banks continued to sustain higher credit growth, expanding their total credit share to 1.6 per cent from 1.0 per cent in March 2021,” per the central bank’s statement on SCBs’ Annual Basic Statistical Return (BSR) on Credit.

Personal loans growth (y-o-y) moderated to 12.9 per cent as on end-March 2026, falling below overall credit growth after consistently outpacing it over the past several years. The share of personal loans, including housing, education, vehicle, personal credit cards, consumer durables and other personal loans, within total credit remained significant and stood at 30.7 per cent, per the statement.

Further, loans to the private corporate sector accounted for more than one fourth of total bank credit and grew (y-o-y) by 15.5 per cent as on end-March 2026 from 11.9 per cent a year ago.

Credit growth (y-o-y) in the agriculture and industrial sectors increased to 14.4 per cent and 12.0 per cent, respectively, as on end-March 2026 from 8.1 per cent and 9.4 per cent a year ago. Their shares in total bank credit stood at 12.9 per cent and 22.4 per cent, respectively, as on end-March 2026.

Household sector

The RBI noted that borrowings by the household sector increased by 14.3 per cent (y-o-y) as on end-March 2026. The sector’s share in total bank credit stood at 58.6 per cent and accounted for about three fifths of the incremental credit during FY26.

Further, the share of individuals in total bank credit remained at 47.8 per cent as on end-March 2026. Within this segment, the share of female borrowers stood at 24.7 per cent, marginally up from 23.8 per cent a year ago.

The share of term loans in total bank credit stood at 62.8 per cent as on end-March 2026. Within term loans, the share of loans bearing interest rates of less than 10 per cent stood at 80.2 per cent.

Published on June 2, 2026