Lending-deposit spread hits 10-year low: WALR explained
Why in the news
The gap between banks’ average lending rate and average term deposit rate narrowed to a decade low in March 2025.
Key facts
- Overall spread: 2.71%, down 5 bps month-on-month.
- Spread on fresh loans: down 22 bps to 2.7%.
About WALR
- The average rate a bank charges, weighted by loan size, so big loans count more.
- Computed as total of (amount x rate) divided by total loans; it changes as loans are added, repaid or modified.
- Covers all loans, retail and corporate.
Uses
- Comparing banks and gauging monetary policy transmission.
- Regulators track policy rate impact, credit conditions and borrowing costs.
Implications of lower WALR
- Cheaper credit and tougher competition among banks.
- Lower borrowing costs, but pressure on bank profitability.
Exam angle
- Companion metric: WADTDR, the weighted average domestic term deposit rate.
- Weighting basis: size of loans or deposits.