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RBI rate hike could redraw economics of banks, NBFCs and deposits

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RBI rate hike could redraw economics of banks, NBFCs and deposits

The RBI's Monetary Policy Committee is meeting from October 5 to 7, with markets and a majority of economists expecting a 25 basis point increase in the repo rate to 5.5 per cent. If delivered, it would be the first rate hike since February 2023, after the central bank cut the repo rate by a cumulative 125 basis points in 2025 to 5.25 per cent.

Fresh lending rates rose to 8.61 per cent in August from 8.52 per cent, while fresh term deposit rates fell to 5.67 per cent from 5.85 per cent. External benchmark linked loans accounted for 68.2 per cent of outstanding floating rate rupee loans at end June, making rate transmission relatively quick for a large part of bank lending. NBFCs could face higher funding costs as bond yields rise and the RBI drains surplus liquidity through VRRR operations. FCNR(B) deposits stood at $132.98 billion, while loans against fixed deposits rose 43.2 per cent year on year to Rs2.04 lakh crore in August.

A possible Reserve Bank of India rate hike could reshape the funding economics of banks and non banking finance companies, with borrowing costs, deposit competition and loan repricing set to become more important for margins in the second half of FY27. 5 per cent. 25 per cent. The potential shift comes as inflation has risen and the transmission of earlier policy changes through bank lending and deposit rates remains uneven. 52 per cent in July.



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