RBI
RBI Repo Rate Hike to Lift Bank Margins, Deposit Rates to Lag
8 October 2026 · The Financial Express
The RBI's 25-bps repo rate hike is expected to expand banks' net interest margins as lending rates rise faster than deposit costs, helped by surplus liquidity from FCNR(B) inflows. Private banks with higher EBLR-linked advances may see quicker benefits from Q3, while PSU banks could see a staggered impact.
Points to Remember
- RBI raised the repo rate by 25 bps, which is expected to boost banks' net interest margins (NIMs).
- About 60% of private-sector banks' advances are EBLR-linked, enabling faster transmission of lending rate hikes.
- As of June 30, EBLR-linked loans were 68.2% of scheduled commercial banks' outstanding floating-rate rupee loans; MCLR loans were 29.6%.
- A 25-bps repo rate hike could expand industry-level NIMs by 14-15 bps, per ICICI Securities.
- Abundant FCNR(B) inflows are delaying deposit rate increases, with lenders expected to raise deposit rates only after surplus liquidity is absorbed, potentially after December.
Why it matters
With the repo rate hike, borrowing costs for customers are set to rise, especially for loans linked to external benchmarks, while deposit rates may stay lower for now due to surplus liquidity. Expect more queries on revised EMIs and consider adjusting your product pricing strategies accordingly.
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