SBI, HSBC and Nomura expect a rate hike. The RBI has not voted.

By Strota Newsroom · 2026-09-29 · How Strota reports

The interest rate that sets the price of a floating home loan in India is still 5.25 per cent. The Reserve Bank's monetary policy committee voted unanimously to leave it there when it met from 3 to 5 August, and it kept a neutral stance, which means it has not committed itself to the next move in either direction. The next meeting runs from 5 to 7 October. The decision comes out on the morning of the 7th.

What has changed is not the rate. It is the view of the people who get paid to guess what the committee will do. State Bank of India's research desk, HSBC and Nomura have each moved to the same call: a 25 basis point increase in October, and another 25 basis points in December, which would take the repo rate to 5.75 per cent. A basis point is one hundredth of a percentage point, so 25 of them is a quarter of a percentage point.

They do not agree on what happens after December. Fitch expects the October move to 5.5 per cent and a second increase in early 2027, also landing at 5.75 per cent. S&P expects only one increase of 25 basis points in the financial year. Deutsche Bank, in reporting by The Economic Times, sees a longer cycle: a pause in February, then further increases in April and June 2027, taking the total rise to 1 percentage point from where the rate sits now. Same starting fact. Four different paths.

The reason the October call moved forward is a stack of news, not one number. HSBC pointed to June-quarter growth of 7.8 per cent, above the Reserve Bank's earlier figure of 7 per cent. SBI pointed to minutes of the August meeting that it read as less relaxed, and to a US Federal Reserve that raised its own rate by 25 basis points on 16 September. A central bank that is still holding, while growth is firm and the Fed has already moved, is the gap these houses are trying to close.

Inflation is the part the committee is formally bound to. Consumer prices rose 4.45 per cent in July, against 2.73 per cent in January. The core measure, which strips out food and fuel, was 3.87 per cent in July and 4.16 per cent in August, according to figures reported by Rediff. HSBC expects the headline rate to stay above 5 per cent for much of the next nine months. SBI's economists said it may cross 6.5 per cent before falling back below 6 per cent in early 2027. The Reserve Bank's stated aim is 4 per cent, with a band around it. Crossing 6 per cent is the top of that band.

Oil is the part SBI called the biggest immediate risk. Crude is back above 100 dollars a barrel. HSBC's Pranjul Bhandari put the rise at 20 per cent since July, tied to the same Gulf shipping risk that has kept a premium in the price. India does not set that price. It imports the barrel, and a dearer barrel shows up in the inflation print the committee has to answer for.

There is a second, less obvious pressure, and it runs the other way from a simple imported-inflation story. HSBC said the Foreign Currency Non-Resident Bank scheme has pulled in 127 billion dollars. SBI put the mobilisation at 127.22 billion dollars as of 31 August. Those dollars lift reserves. They also leave rupees in the banking system. HSBC's estimate of the resulting core liquidity surplus is nearly Rs 15 trillion. Money sitting idle in banks is not inflation by itself. It becomes a problem if banks start depending on it, which is why HSBC also expects the October meeting to say something about draining liquidity, not only about the rate.

For a reader with a loan, the mechanism is short. The repo rate is what the Reserve Bank charges banks for overnight money. A floating retail loan is priced off that rate, usually with a spread the bank sets. If the repo moves by 25 basis points, the benchmark those loans reset against moves with it. A loan already on a fixed rate does not. The corridor around the repo is already set: banks can park surplus at the standing deposit facility at 5.00 per cent, and borrow at the marginal standing facility at 5.50 per cent. Those two move when the repo moves, because they are defined as a quarter point either side of it.

The bond market has not waited for the committee. SBI Research said the yield on the 10-year government bond is already above 7 per cent, and the US 10-year is near 5 per cent. A higher yield is the market charging the government more to borrow. It is also a signal that traders are pricing tighter money before any vote has been taken.

The most useful sentence in the whole pile of notes is the one that refuses to pretend the vote is settled. Nomura's economists, Sonal Varma and Aurodeep Nandi, put a 60 per cent probability on a 25 basis point increase in October and 40 per cent on another hold. They called the meeting live, and not a done deal. That is a research house telling its clients the call can be wrong.

What none of these notes is, is a decision. The August vote was six members, all of them for a hold, and the stance stayed neutral. No subsequent release from the Reserve Bank has pre-committed the October outcome. A research call is a view sold to clients. A policy rate is a vote taken in a room in Mumbai on a dated morning.

The practical distinction for a household is the reset date, not the headline. A floating loan only picks up a new repo rate when the bank's reset cycle reaches it. A loan that resets in November feels an October change. A loan that reset in September does not feel it until the next cycle. That is arithmetic about a contract, not a suggestion about what to do with one.

The honest close is that the disagreement is the story. Three research houses expect two increases by December. One rating agency expects one. Another expects a longer cycle. The committee that actually sets the rate last voted to do nothing, and it meets again on 7 October. Until that morning, 5.25 per cent is the number, and everything else is a view about what replaces it.

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