Policy rate cuts and pace of transmission: Tracking an impactful five months in 2025

The Reserve Bank of India (RBI) reduced the repo rate by 100 basis points between February and June 2025, bringing it down to 5.5%. Banks responded with a 58 bps drop in the weighted average lending rate (WALR) on fresh loans in June, reaching 8.62%.

By Aanya Thakur, ET Bureau | Aug 04, 2025, 06.47 AM IST

One-year average MCLR fell from 9% in March to 8.75% in June

How much has the RBI cut the policy rate recently?
RBI reduced repo rate by 100 basis points over five months (Feb–June 2025), bringing it down to 5.5%

How have the banks responded
On fresh loans: Weighted average lending rate (WALR) dropped 58 bps in June to 8.62%—the sharpest monthly decline— from 9.20% in May

On outstanding loans: WALR declined 22 bps in June to 9.45%

Bank group-wise transmission

PSU banks: Strongest pass-through on outstanding loans: 34 bps, now at 8.76%
Private banks: Lower transmission: 28 bps, with WALR at 10.47%

Transmission of rate since February
On fresh loans (since Feb): 78 bps (9.40% to 8.62%) On outstanding loans: 33bps (9.78% to 9.45%)

Benchmark Impact