The Reserve Bank of India raised its benchmark interest rate by 25 basis points to 5.50% on Wednesday, marking the first hike in more than three years. The Monetary Policy Committee unanimously approved the increase and changed its stance to 'calibrated tightening' from 'neutral' with a 4:2 majority. As per Upstox News Desk, rate cuts are off the table in the near term and policy action ahead can only be a rate hike or a pause, depending on evolving conditions. The RBI's guidance effectively narrows the range of likely policy moves at upcoming meetings to either a pause or another rate increase.
UCO Bank has announced upward revision in its repo-linked, treasury bill-linked and government securities-linked benchmark lending rates, effective from October 8, 2026. The Kolkata-headquartered public sector lender's Asset Liability Management Committee (ALCO) reviewed the benchmark rates and decided on the revision, according to a regulatory filing to stock exchanges. The bank raised its repo-linked lending rate (RLLR) for the UCO Float variant by 25 basis points to 8.30% from 8.05%, mirroring the RBI's move. The UCO Prime variant was increased by 25 basis points to 5.50% from 5.25%. Treasury bill linked lending rates (TBLR) were hiked across tenors, with the three-month TBLR raised to 5.30% from 5.25%, six-month rate to 5.70% from 5.55%, and 12-month rate to 5.95% from 5.70%. The bank's one-year G-Sec rate was revised to 6.26% from 5.88%, while the 10-year G-Sec rate increased to 7.32% from 7.09%.
Indian Overseas Bank has increased its Marginal Cost of Funds-based Lending Rate by 5 basis points across six tenors, effective October 15, 2026. The Chennai-based bank's overnight MCLR has increased to 7.95% from 7.90%, while the three-month rate has risen to 8.50% from 8.45%. The six-month MCLR has been raised to 8.75% from 8.70%, and the one-year and two-year MCLR rates have each increased to 8.90% from 8.85%. The three-year rate has risen to 8.95% from 8.90%, while the one-month MCLR remains unchanged at 8.25%. The revised rates will remain in effect until further review, with the bank noting that an increase can raise borrowing costs for customers whose loans are linked to the revised benchmark, depending on their loan terms and reset dates.
Brokerages have turned constructive on stocks across FMCG, pharma, telecom, fintech, IT services and NBFCs, highlighting opportunities in Bharti Airtel, ITC, Sun Pharma, Paytm, Shriram Finance, Jubilant FoodWorks, Sagility India and Inventurus Knowledge Solutions. According to reports from NDTV Profit, the RBI's shift to calibrated tightening stance has lifted consensus rate hike expectations to 75-100 basis points from 50 basis points, with brokerages expecting 50 basis points of additional tightening in the base case. BofA believes the RBI would maintain a hawkish bias with a possibility of a deeper rate hike cycle, reiterating their call for a 100 basis points hike.
UCO Bank maintained its marginal cost of funds based lending rate (MCLR) unchanged across all tenors, with the overnight MCLR at 7.90%, one-month at 8.20%, three-month at 8.45%, six-month at 8.70%, and one-year at 8.80%. The bank kept its base rate at 9.60% and benchmark prime lending rate (BPLR) at 14.25%. As per The Hindu BusinessLine, the revised TBLR-linked rates, G-Sec-linked rates and repo-linked rate are effective from October 8, while the other benchmark rates remain unchanged. IO Bank's revised MCLR structure shows the overnight rate at 7.95%, three-month at 8.50%, six-month at 8.75%, one-year at 8.90%, two-year at 8.90%, three-year at 8.95%, and one-month remaining at 8.25%.
The RBI raised its inflation forecast for 2026-27 by 20 basis points to 5.2%, while increasing its GDP growth projection by 40 basis points to 7.1%. As per ICRA, the inflation outlook has become less benign, with headline CPI inflation expected to average around 5.8% over the next three quarters. The agency expects headline inflation to average 5% in 2026-27 in its baseline scenario, assuming crude oil prices average $85-95 per barrel in the second half of the fiscal. ICRA expects another 25-basis-point hike at the December meeting, followed by a pause unless there are sizeable negative surprises on the inflation front. The 10-year government security yield is expected to trade in the 7.15-7.35% range in the near term, with yields potentially hardening further as expectations of a December rate hike become more certain.
Brokerages expect double-digit growth to continue with resilient domestic demand and early festive inventory build-up supporting earnings. According to NDTV Profit, Jefferies expects small- and mid-caps to continue outpacing large caps in earnings growth, with most compelling high-growth themes being capex, modern manufacturing, and AI/data-center. The change in policy stance to calibrated tightening has raised concerns about a prolonged tightening cycle, with brokerages maintaining cautious optimism across various sectors despite inflationary pressures. ICRA expects seasonal currency leakage and the unwinding of the RBI's forward book to weigh on liquidity in the second half of 2026-27, with the central bank likely to primarily use VRRR auctions to absorb excess liquidity.
