RBI’s big disclosure: Foreign banks are benefiting the most from repo rate cut, government laggards

Foreign banks operating in the country have won in passing on the benefits of the reduction in repo rates by the Reserve Bank of India (RBI) to the common customers. According to the latest monthly bulletin issued by RBI, during the current ‘rate cut cycle’ (February 2025 to May 2026), foreign banks have cut new and old loan as well as deposit (FD) rates the most and faster than government and private banks. Let us understand from the perspective of a business reporter which bank is giving the most relief to its customers in the game of numbers.

Foreign banks are at the forefront in reducing interest rates on new loans.

According to RBI data, banks re-set their loan and deposit rates after the central bank cut the repo rate by a total of 1.25 per cent (125 bps):

• Foreign Banks: They have increased their weighted average lending rate (WALR) on new rupee loans. 1.24 percent There has been a huge cut of 1.25%, which is closest to the RBI figure of 1.25%.

• Private Banks: Private sector banks have increased the interest rates on new loans. 1.08 percent Deducted Rs.

• Public Sector Banks: Public sector banks were last in reducing the rates and they only increased rates on new loans. 0.66 percent Gave relief only.

At the same time, if we talk about already existing loans, then there also foreign banks took the lead with a reduction of 1.20%, while private banks reduced the rates by 0.98% and government banks reduced the rates by 0.81%.

Foreign banks also made the sharpest cut in deposit (FD) rates.

The impact of lowering of repo rate not only on loans becoming cheaper, but also on the interest rates of bank fixed deposits (FD). Transmission of foreign banks was also most aggressive in reducing FD rates:

Why do foreign banks change rates so rapidly?

Banking experts believe that the loan portfolio of foreign banks is mainly based on corporate and high-net-worth clients, where the rates are directly linked to the external benchmark (EBLR) or repo rate. Moreover, they have quite flexible liquidity management.

In contrast, Indian government and private banks are more dependent on retail depositors, due to which they are not able to reduce their liability costs immediately. However, it is clear from this bulletin of RBI that the real benefit of the repo rate cut by the Reserve Bank is currently being received the most by the customers of foreign banks.