MUMBAI – Monetary easing in India has triggered a significant shift in the lending landscape, with the majority of bank credit now priced below the 9% threshold. Following a cumulative 125 basis point cut in the repo rate by the RBI—bringing it down to 5.25%—borrowing has become substantially cheaper for both consumers and businesses.

Key Lending Trends

• Interest Rate Shift: The proportion of loans with interest rates under 9% surged to 62.4% in December 2025, up from 42.2% a year prior.
• PSU Dominance: Public sector banks are leading the charge with 14.1% credit growth, outperforming the overall banking system for five consecutive quarters.
• Hinterland Growth: Credit expansion is booming outside major metros. Rural, semi-urban, and urban branches now account for 40.4% of total bank lending.

Impact on Deposits

As lending rates fall, deposit rates are following suit. The share of term deposits offering less than 7% interest jumped to 56.3% in December 2025, a sharp increase from the 29.2% seen in 2024. While deposit growth remained stable at 10.5%, the trend indicates that the era of high-yield fixed deposits is cooling in tandem with the RBI's policy shifts.