Even as the RBI has held its repo rate, banks are likely to take cues from the bond markets, where yields are likely to inch up
Contrary to widespread expectations of a rate hike, the RBI surprised markets (though not pleasantly) by holding its key policy repo rate — at which banks borrow short-term funds from the RBI. Even so, borrowers should not rejoice prematurely. Lending rates are set to move higher — rate hike or no — as banks will continue to take cues from the bond market. Risks to fiscal slippages, global factors and the depreciating rupee are likely to lead to hardening of yields in the coming months.
Banks have already been raising lending and deposit rates notably over the past six months. The
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