ay 31, 2026 18:00 IST
The transmission of the Reserve Bank of India’s cumulative 125-basis-point repo rate cut between February 2025 and March 2026 has remained uneven across banks and non-bank lenders, according to the RBI’s annual report. Overall, lending rates on outstanding rupee loans of scheduled commercial banks declined by 88 basis points during the period. In contrast, lending rates on outstanding rupee loans extended by non-banking financial companies (NBFCs) fell by only 16 basis points.
“Lending rates of NBFCs are typically higher than those of banks due to differences in funding structures and borrower risk profiles. Consequently, the extent of monetary policy transmission differs between NBFCs and SCBs,” the RBI said in the report.
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Sector-Wise Impact
For scheduled commercial banks, the weighted average lending rate on fresh rupee loans declined across all sectors during 2025-26. The steepest reduction was seen in rupee export credit, where rates fell by 129 basis points year-on-year, followed by education loans (127 bps), professional services (104 bps), MSMEs (97 bps), trade (94 bps), large industry (92 bps) and housing loans (92 bps). For outstanding loans, lending rates fell the most in the trade segment, followed by housing and education.
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Rising Bond Yields
“NBFCs have had a higher borrowing cost over the period. Hence, their transmission has lagged SCBs. Now with interest rates looking up, especially with bond yields shooting up by almost 100 bps over 3 months, the lending rates would be steady with an upward bias,” Sanjay Agarwal, Senior Director and head of BFSI CareEdge Ratings said.
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