India Inc's earnings may take a hit in coming quarters as rates rise

Listed non-financial firms had saved nearly Rs 1 trn because of decline in interest rates in FY21, FY22

Two successive rate hikes by the Reserve Bank of India (RBI), including the 50-basis-point (bp) increase announced on Wednesday, and the resulting reversal in the interest rate cycle could hit corporate profitability in the coming quarters.

This is because India Inc gained handsomely from a decline in interest rates in financial year 2020-21 (FY21) and FY21 after the central bank cut the policy rate to a record low of 4 per cent in May 2020 and expanded liquidity after the outbreak of the Covid-19 pandemic.

In all, companies in Business Standard’s sample saved nearly Rs 1 trillion from the decline