RBI policy transmission lowers fresh loan rates faster in FY26: Report | Finance News
The Reserve Bank of India’s (RBI’s) accommodative monetary stance and cumulative rate cut during late FY25 and FY26 led to broad-based easing in lending rates across sectors, a new report shows.
According to CareEdge Ratings, transmission was more pronounced in fresh loans, reflecting the growing share of External Benchmark Lending Rate (EBLR)-linked lending and faster repricing by banks. EBLR is a floating interest rate system used by banks for retail loans; it links your loan rate directly to an external benchmark, such as the RBI’s repo rate, making rate changes highly transparent.
Among fresh loans, the sharpest decline in lending rates was observed in education loans (-127 basis points or bps), followed by MSMEs (-97 bps), trade (-94 bps), large industry (-92 bps) and housing loans (-92 bps).
The report said this indicates stronger transmission in competitive retail and business lending segments.
For outstanding loans (o/s), repricing was relatively gradual due to legacy contracts. The largest decline was seen in trade (-100 bps) and housing loans (-99 bps), followed by education (-96 bps), infra (-91 bps), large industry (-88 bps) and MSMEs (-85 bps).
Overall, it indicates that monetary transmission in FY26 was broad-based and effective, with new loan rates adjusting faster than o/s loan rates. The decline in borrowing costs across housing, MSME, trade and corporate segments supported credit demand and improved credit affordability amid surplus liquidity conditions.
