Foreign banks win in reducing loan EMI, big revelation in RBI report

Foreign banks have given the maximum benefit to the customers from the policy rate cut of the Indian banking regulator Reserve Bank of India. During the current rate cut cycle, foreign banks have cut interest rates on both loans and deposits more than government and private sector banks. This has been revealed in the monthly bulletin of RBI. Let us also tell you what kind of important information has been given in the RBI report regarding reducing the loan EMI of common people.

Cut in both EBLR and MCLR

According to the bulletin, during the easing of monetary policy between February 2025 and May 2026, scheduled commercial banks reduced the External benchmark-based interest rate (EBLR) and Marginal Cost of Funds based Lending Rate (MCLR) linked to the repo rate. The biggest benefit of this cut in new loan rates was seen in sectors related to infrastructure and other external benchmark-based interest rates. According to the data, foreign banks cut the weighted average interest rate on new loans taken in rupees by 1.24 percent. In comparison, private banks decreased by 1.08 percent and government banks decreased by 0.66 percent points. Foreign banks were at the forefront in reducing interest on outstanding loans taken in rupees. They cut interest rates by 1.20 percent, while private banks reduced them by 0.98 percent and public sector banks by 0.81 percentage points.

interest rate on FD

In case of deposit rates also, foreign banks made the maximum reduction. Foreign banks reduced the weighted average interest rate on new domestic fixed deposits by 0.91 percent, while private and public sector banks reduced it by 0.74 percent and 0.73 percent, respectively. Similarly, foreign banks reduced interest rates on existing deposits by 0.90 percent. This is much more than the reduction of 0.46 percentage points by private banks and 0.53 percentage points by public sector banks. RBI has reduced the repo rate by a total of 1.25 percentage points since February last year. Last year, the central bank had reduced the monetary policy by 0.25 percentage points in the February, April and December meetings and by 0.50 percentage points in the June meeting. However, the repo rate was kept unchanged in the monetary policy meetings of August, October and February 2026.