Why rising bond yields are a concern for India
India's bond yields jumped after the RBI kept its repo rate steady at 5.25% for the third time in four meetings, despite rate cuts since February 2025.
Lending rates haven't fallen as much as expected, raising concerns about banks' margins and potentially constraining some lenders' ability to expand loans.
Borrowing costs could go up
Rising bond yields mean borrowing costs could go up, which affects everything from home loans to startup funding.
The 10-year yield shot up to around 6.7% after the RBI's announcement, partly because of deposit shortfalls and tight domestic liquidity, along with heavy government borrowing and global rate moves.
Actual lending rates have not dropped much
The RBI didn't introduce any fresh liquidity measures that markets were hoping for, so investors are demanding higher returns from bonds, amid US Treasury yield moves and concerns about inflation.
Even though the RBI has cut rates by 125 basis points since last year, actual lending rates have dropped less due to ongoing cash crunches and rising deposit costs for banks.