Firms set for rate change hiccups; stable corporate yields a positive

Yields on 10-year government bonds rose from 6.65% in April 2017 to around 7.50% now

Interest rates have started firming up even as the Reserve Bank of India has indicated that it favours a long pause. Interestingly though, the corporate sector seemed to be set for handling the pressure much better this time compared to what it had done in the past.

Always the first to be affected by any rate change cycle, retail loans, mainly home loans, have started heading north. All other loan rates are likely to witness an uptick. Lenders have also started hiking deposit rates.

According to the marginal cost-based lending rate (MCLR) mechanism, banks have to consider the rise in the incremental