Uday Kotak, founder of Kotak Mahindra Bank, expects the Reserve Bank of India to raise interest rates by 50-75 basis points due to ongoing inflation and energy price concerns. This outlook comes as India navigates $29 billion in foreign investor outflows during 2026. Despite global market volatility, domestic investment remains a key support for equity markets.
Uday Kotak, the founder and non-executive director of Kotak Mahindra Bank, has forecasted that the Reserve Bank of India (RBI) may increase the policy repo rate by another 50 to 75 basis points. A basis point is a standard unit of measure for interest rates, where 100 basis points equal 1 percent. This potential move is aimed at managing macroeconomic pressures, including persistent inflation and rising energy costs, which continue to challenge the Indian economy.
Impact on Lending and Deposit Rates
The anticipation of tighter monetary policy is already reflecting in banking operations. Following recent central bank signals, Kotak Mahindra Bank adjusted its fixed deposit interest rates effective November 4, 2026. Such adjustments are common as banks prepare for a higher interest rate environment, which generally increases the cost of borrowing for companies and individuals while offering better returns for savers. Investors and bank customers are closely watching these moves to understand the trajectory of credit costs in the coming quarters.
Navigating Global Outflows and Market Resilience
India’s equity markets have faced a difficult year in 2026, marked by significant foreign institutional investor (FII) outflows totaling $29 billion. This trend was largely driven by global investors reallocating funds to the US artificial intelligence sector, which had attracted massive capital. However, Indian markets have shown notable resilience. On November 5, 2026, both the Sensex and Nifty indices recorded gains of over 2% intraday, underscoring that strong domestic investor participation is acting as a safety net against the volatility triggered by foreign selling.
Risks and Future Outlook
While the domestic market has demonstrated stability, structural risks remain. The country’s trade balance is particularly sensitive to global energy prices. Higher crude oil costs, driven by regional conflicts, continue to pressure the economy and could influence the RBI’s decision-making process. If these energy costs remain elevated, they could limit the central bank's ability to lower rates in the future. Furthermore, as global equity valuations—specifically in the technology sector—face potential correction, there is a possibility that foreign capital may eventually seek to return to emerging markets like India, provided that domestic growth profiles remain attractive.
For investors, the most important updates to track will be the upcoming RBI policy meeting announcements, future inflation data, and global oil price trends. Any further changes in central bank policy will likely influence not just bank interest rates, but also bond yields and overall corporate profitability in sectors sensitive to borrowing costs.