The government laments that private sector banks were less than generous in transmitting the lower borrowing costs compared with their state-owned peers while they made record profits which was higher than state lenders despite having just a third of the market share.

“The transmission has been slightly higher in public sector banks than private sector banks in the overall current monetary easing cycle, though it was higher for private banks in April-November 2021,” according to the Economic Survey for 2021-22.

As per data presented in the survey, the weighted average lending rate (WALR) on outstanding rupee loans fell by 135 basis points for public sector banks. One basis point is 0.01%.

The average lending rate for private sector banks was at 123 bps. Likewise, the WALR on fresh rupee loans fell by 210 bps for public sector banks and 177 bps for private sector banks during February 2019- November 2021, data showed.

Since February 2019, the Reserve Bank of India has reduced repo rate by 250 bps. Large surplus systemic liquidity, the regulator’s continued accommodative stance on monetary policy and the external benchmark linked pricing of loans have helped faster transmission of policy rates.

As per data presented in the economic survey, WALR on outstanding rupee loans reduced by 12 bps for public sector banks and 31 bps for private banks, whereas the WALR on fresh loans increased by 8 bps for public sector banks.

During April-November 2021, the 1-year median Marginal Cost of funds-based Lending Rate (MCLR) declined by 10 bps, the Weighted Average Lending Rates (WALR) on outstanding loans moderated by 19 bps, though it increased by 6 bps on fresh loans.

In the meantime, private banks continued to surpass public sector banks in posting healthy earnings growth. The profits after tax for public sector banks increased from Rs 14,688 crore during first half of 2020-21 to Rs 31,144 crore during first half of 2021-22.

During, the same period the net profit for private sector banks increased from Rs 32,762 crore to Rs 38,234 crore during the same period. Overall, scheduled commercial banks increased their net profit from Rs 59,426 crore at end-September 2020 to Rs 78,729 crore at end-September 2021.