MUMBAI: Weighted average lending rates on fresh rupee loans across the banking system rose by 10 basis points to 8.71% end-November, central bank data showed. One basis point is a hundredth of a percentage point.

State-run banks led the increase, raising lending rates by 16 bps month-on-month to 8.05%, while rates at private banks remained unchanged at 9.44%. Foreign banks, meanwhile, lowered lending rates by 6 bps to 8.18% from 8.24% in October.

The upward pressure on lending rates reflects rising 10-year sovereign bond yields and sluggish deposit growth, which have constrained banks' ability to reprice deposits downward and, in turn, limited the pass-through of policy rate cuts to borrowers.

"System liquidity has been tight, 10-year sovereign yields have hardened, and deposit repricing remains difficult for banks amid slower deposit growth," said Prakash Agarwal, partner at Gefion Capital.

"Until systemic liquidity conditions improve, banks will find it challenging to pass on the full benefit of rate cuts to borrowers."

Banking system liquidity has remained largely in deficit since mid-December, before turning marginally positive earlier this week, with surplus liquidity of around Rs 17,000 crore.

Despite the RBI's aggressive rate cuts, long-term yields have continued to rise. The 10-year benchmark yield, which had declined to around 6.2% in May, has moved up by about 30 bps following the front-loaded 50 bps policy rate cut in June 2025.

Even after a cumulative 125 bps cut in the repo rate during the current calendar year, the weighted average lending rate (WALR) on fresh rupee loans of scheduled commercial banks (SCBs) declined by 69 bps between February and October 2025, RBI data showed. The WALR on outstanding rupee loans moderated by a relatively lower 63 bps over the same period.

On the deposit side, weighted average deposit rates on fresh term deposits edged down by 2 bps in November to 5.59%. While state-run and private banks raised deposit rates by 3-4 bps, foreign banks cut rates by 8 bps, pulling down the system-wide average.

In terms of transmission, the weighted average domestic term deposit rate (WADTDR) on fresh deposits has declined by 105 bps so far in the easing cycle, while the rate on outstanding deposits has softened by 32 bps.

Reflecting these trends, the WALR on outstanding rupee loans of SCBs eased marginally to 9.21% in November 2025 from 9.24% in October, while the WADTDR on outstanding rupee term deposits declined to 6.73% from 6.78% over the same period.