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Overview

* In May 2023, fresh lending rates rose while deposit rates decreased. Meanwhile, rates on outstanding business continued to climb.

*The weighted average lending rate (WALR) on fresh rupee loans of SCBs increased by 19 basis points (bps) from 9.08% in April 2023 to 9.27% in May 2023 and the WALR on outstanding rupee loans of SCBs increased by 2 bps from 9.76% in April 2023 to 9.78% in May 2023.

* The weighted average domestic term deposit rate (WADTDR) on fresh rupee term deposits of SCBs decreased by 4 bps from 6.36% in April 2023 to 6.32% in May 2023. Meanwhile, WADTDR on outstanding rupee term deposits of SCBs increased by 9 bps from 6.28% in April 2023 to 6.37% in May 2023. 

* 1-Year median Marginal Cost of Fund based Lending Rate (MCLR) of SCBs increased from 8.60% in May 2023 to 8.65% in June 2023.

* The share of External Benchmark based Lending Rate (EBLR) linked loans in total outstanding floating rate rupee loans of SCBs stood at 49.6% at end-March 2023, while share of MCLR-linked loans was 45.5%.

Continued Large Credit and Deposit Growth Gap Coupled with Lower Liquidity Levels

Fig 1: Growth in Credit Continues to Outpace Deposit

Fig 2: Bank System Liquidity (Net Liquidity Injected)

Credit demand has been recording double-digit growth driven by personal loans, increased working capital requirements, and NBFCs. Meanwhile, comparatively lower deposit mobilisation and pick-up in credit offtake have pushed the credit deposit ratio to nearly 75.5% as of June 16, 2023. The banking system liquidity surplus has narrowed from Rs 6.3 lakh crore at the start of FY23, turned into a shortfall near the end of FY23 and subsequently improved in the beginning of FY24. The Short-term Weighted Average Call Rate (WACR) stood at 6.1% as of June 16, 2023, as compared with 4.51% as of June 17, 2022.

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