There’s going to be an interest rate rise on 28 February. In just a few weeks you are going to see about 0.25% added to mortgage and savings rates.
Banks are also being forced to raise deposit rates so they can attract more funds, and they continue to set aside more capital as they clear a near-record $147 billion in soured debt.
Economists see little relief in sight , but are calling on the RBI to step in to support debt markets , including through debt purchases , thus easing at least one of the major challenges banks face.
Instead , for the first time in years , banks are going to be scrambling to offer savers better rates – and the losers will be anyone taking out a new mortgage.
On 28 February an extraordinary financial measure , put in place in the days after the Brexit vote , will end.
Soumya Kanti Ghosh , chief economist at State Bank of India said that lending rates might go up with such a large increase in bond yields.
Rate increases are likely to pinch borrowers more this time , thanks to the MCLR framework. This is because changes in deposit rates will immediately reflect on banks’ cost of funds under MCLR , leading to a much sharper and quicker rise in lending rates. As such , banks have been more nimble in passing on rate hikes to borrowers in the past.