The Reserve Bank of India has cut its repo rate by 100 basis points this year to spur growth. Your EMI on loans should have eased as well. Rates should have fallen, if not by the full 100 basis points, at least partially. Yet this seems true only for existing loans. For fresh loans, most of the benefits of the rate cut are still to seep in.
The difference lies in how banks price loans. The interest on existing loans is mostly linked directly to the repo rate. When the RBI lowers the rate at which it lends to banks, they are left with no option but to pass it on to existing borrowers. For new loans, however, banks retain greater leeway. This raises a natural question: are banks short-changing new customers?
Banks, in fact, look at several factors beyond the repo rate when deciding the cost of fresh loans. One is how much they are paying on deposits. Another is the yield on government bonds.
Normally, banks move quickly to cut deposit rates after a repo rate cut. This time, though, they are reluctant. Competition for deposits remains fierce, keeping deposit rates higher than expected. When deposit costs stay firm, lending rates soften only marginally. The latest data shows that the average marginal cost of fund-based lending rate of scheduled commercial banks fell just 15 basis points in August, to 8.60% from 8.75% in July.
Bond yields have added to the pressure. Yields have stayed elevated in recent months, largely because of an unexpected shift in RBI’s stance to neutral in an earlier policy and a higher-than-anticipated supply of state government bonds. Banks, the primary buyers of these securities, demanded higher yields. The situation reached a point earlier this month when some states withdrew their bonds from auction or accepted far less than they had offered for two consecutive weeks.
Rising state borrowings, especially with GST rationalisation expected to dent their revenues in the near term, are likely to keep yields firm. That, in turn, feeds into demand for central government bonds as well, tightening conditions for banks. Bond yields have risen about 20 basis points in the past two months.
Where does this leave your EMI? The latest numbers show that the average interest rate on outstanding loans was 9.38% in July, down from 9.67% in May. But for fresh loans, the average rate had actually risen to 8.80% in July from 8.62% in June. In effect, existing borrowers have felt the benefit of the RBI’s rate cuts, but new borrowers are still paying more.
The RBI will release the data for August next week, and only then will we know if the divergence between fresh and outstanding loans has stayed stable or widened further.
Kidnapping, really!
In one of the most unusual defences to emerge from a corporate investigation, Seacoast Shipping Services Ltd (SSSL) claimed that money raised from a rights issue was diverted not to enrich its promoters, but to pay ransom following the kidnapping of the managing director’s son. The Securities and Exchange Board of India (SEBI), however, has dismissed this justification, calling it unsubstantiated and symptomatic of deeper governance failures.
SEBI’s investigation, covering April 2020 to December 2023, found widespread misrepresentation of financial statements, diversion of funds, and questionable preferential allotments at SSSL. The company, previously known as Mahaan Impex, had reported a surge in revenue and profit during FY21, much of it linked to related-party transactions.
During the probe, SSSL admitted that proceeds of a rights issue were “regretfully not utilised for business purposes,” because the son of managing director Manish Shah had been kidnapped. Funds were allegedly handed over to two individuals as ransom. But SEBI found no documentary evidence to corroborate this explanation, noting that neither police complaints nor credible records supported the claim
Instead, investigators traced a pattern of circular transactions and diversions. More than 85% of the company’s reported sales and nearly all of its declared assets were found fictitious. Promoters had steadily diluted their stakes—from nearly 74% at peak to virtually nil by late 2024—while retail investor participation soared. SEBI concluded that promoters enriched themselves through preferential allotments and stake sales even as financial disclosures misled the market
The regulator was particularly harsh on the company’s attempt to link diversion of funds to a personal crisis. “A serious charge like fraud cannot be explained away by unverifiable claims of kidnapping,” SEBI noted, pointing out that such narratives undermined the seriousness of investor protection norms.
As part of its directions, SEBI has restrained SSSL from raising public money, ordered promoters to return diverted funds, impounded alleged unlawful gains, and barred key directors from associating with listed companies or market intermediaries. Banks and depositories have also been instructed to freeze related accounts until recoveries are made
For investors, the case underscores the need for heightened scrutiny, particularly when small-cap firms display sudden growth spurts backed by weak fundamentals.
Crashed and Burned
Moving on to some corporate news, Tata Motors is staring at massive losses after its British luxury unit Jaguar Land Rover was hit by a cyberattack by unknown hackers in early September. Since the cyberattack, JLR has suspended its operations and closed until October 1 its three factories in Britain that make about 1,000 cars a day. JLR has also asked many of its 33,000 employees told to stay at home until production is fully restored.
So, what’s the financial hit that JLR might take? The Range Rover maker hasn’t disclosed any numbers. But the BBC said the company is losing about 50 million pounds, or about Rs 590 crore, a week. In another report, the Financial Times said the total damage could top 2 billion pounds, or about Rs 23,700 crore, because the company didn’t have a cyber insurance deal and was likely uninsured directly for the attack.
If that’s true, this could wipe out JLR’s annual profits and plunge it into losses—the company recorded a net profit of about 1.8 billion pounds for 2024-25. More worryingly, it could also deeply hurt Tata Motors itself. This is because JLR accounts for more than 70% of Tata Motors’ revenue and over 80% of its profit.
For 2024-25, the Indian company posted a consolidated net profit of Rs 28,149 crore. This year, sales at home had already been slow in the initial months. Still, the company—like other automakers—would have been expecting a rebound after the government slashed the goods and services tax.
However, the cyberattack would now make it impossible for the company to meet last year’s numbers. The debt-driven acquisition of Italian manufacturer Iveco Group’s commercial vehicle business for about $4.5 billion could put further pressure on the Indian company.
On a broader level, the cyberattack underlines how vulnerable even the largest global businesses are to cyber and ransom attacks that are becoming increasingly sophisticated and more frequent. Indian companies will have to be better prepared to deal with such attacks.
Visa Wall
US President Donald Trump last week raised the fee on H-1B visas to $100,000, a level that makes it prohibitively expensive to hire foreign workers. This move mainly affects Indian professionals, who have consistently accounted for nearly three-fourths of H-1B allocations in recent years. The immediate impact may be contained, as Indian IT services firms have been steadily reducing their dependence on the visa. Yet large US technology companies such as Amazon and Google remain among the biggest users, and their strategies will shape the ripple effects.
Analysts point out that silver linings may emerge from this shock. Higher visa costs could push US firms to increase offshoring to India, expanding their reliance on service delivery from here. Another likely outcome is a renewed wave of Global Capability Centres (GCCs) being opened or scaled up in India, as multinational companies try to control costs and diversify talent pipelines.
This week, the US administration raised the pressure further by announcing a 100% tax on branded or patented pharmaceutical products. For India, which exported $9.8 billion worth of pharmaceuticals to the US in FY25, this announcement carries both risks and ambiguities. The tariff does not apply to generic medicines, which form the bulk of India’s exports, and it exempts companies that already own or are building manufacturing facilities in the US.
The confusion lies in the interpretation of “branded” drugs. If branded generics are considered part of the patented category, then India’s exposure will be limited and the brunt will fall on European companies. But if branded generics are treated simply as branded products, a significant share of India’s drug shipments could face the full 100% tariff. That would create substantial pressure for exporters, particularly those dependent on the US market.
India is already under strain from earlier tariff hikes. Nearly half of its exports to the US currently face a 50% duty, much of it imposed in response to Washington’s accusation of Indian trade links with Russia.
The combination of visa restrictions and tariffs on pharmaceuticals come at a time when Indian ministers are in the US to negotiate a trade deal. Not a welcome, they would have expected.
Market Wrap
India’s stock markets ended a three-week winning streak and closed lower this week after US President Donald Trump
imposed tariffs on pharmaceuticals and tightened the H1-B visa regime.
The Nifty 50 and the BSE Sensex slipped 2.7% each for the week, their steepest weekly drop in almost seven months.
The mid-cap index lost 4.6% and the small-caps slumped 5.1%.
All 16 major sectoral indexes ended in the red the week, with IT and pharmaceuticals falling the most.
The IT index plunged almost 8%, its steepest fall in about seven months, after Trump imposed a $100,000 fee on new
H1-B visas. This could raise costs for Indian IT firms, which get a big part of revenue from the US.
The pharma index lost 2.1% on Friday and 5.2% for the week after Trump imposed 100% tariffs on branded and
patented medicines from October 1.
Meanwhile, foreign investors resumed their sell-off after two weeks of buying. They sold Indian shares worth about $1.4
billion in the first four days of the week, taking September’s net sales to nearly $2 billion.
Only three Sensex and eight Nifty stocks managed to stay in the green. Maruti Suzuki, Axis Bank and Larsen & Toubro
were the top gainers.
Tech Mahindra was the biggest loser this week, falling 9.4%. It was followed by TCS, which sank 8.5%. Wipro slumped
7.9%, Infosys lost almost 6% and HCL Tech nearly 5%.
Drugmakers Dr Reddy’s Labs, Cipla and Sun Pharma lost 4-5% each. Other big losers included retailer Trent, Jio Financial,
Asian Paints, automakers Mahindra & Mahindra and Tata Motors, and Zomato parent Eternal.
Other Headlines
- Govt signs Rs 62,370 crore deal to buy Tejas fighter jets from Hindustan Aeronautics Ltd
- UK’s Nothing forms $100 million JV with Optiemus Infracom to make smartphones in India
- Swiggy to sell entire stake in Rapido to WestBridge, Prosus for Rs 2,400 crore
- Walmart-backed PhonePe files DRHP for IPO, targets mid-2026 listing
- Eli Lilly plans to bring experimental weight-loss pill orforglipron in India
- Glenmark unit to get license for cancer drug from China’s Jiangsu Hengrui
- GST reforms to ease retail prices, boost consumption: RBI bulletin
- Waaree Energies under US probe for evading solar tariff duties, reports Bloomberg
- HSBC lifts Indian equities to ‘overweight’ from ‘neutral’ as valuations attractive versus peers
- ONGC eyes acquisition of 2.5-3 GW renewable energy projects
- Accenture plans new campus in Andhra Pradesh, eyes adding 12,000 jobs
- Tata Advanced Systems opens armoured vehicles plant in Morocco
- IndusInd Bank names Viral Damania as CFO
That’s all for this week. Until next week, happy investing!
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: Investing in International Markets
Start investing through a platform that brings goal planning and investing to your fingertips. Visit kuvera.in to discover Direct Plans and Fixed Deposits and start investing today. #MutualFundSahiHai #KuveraSabseSahiHai
