New Delhi, Oct. 5 -- Global central banks have responded to the intensifying war in West Asia, inflationary risks, rising bond yields and ongoing trade uncertainty by raising interest rates in their home economies. A rate hike appears imminent in India too: nine out of 10 economists in a Mint poll expected a 25 basis point increase in the policy repo rate later this week. The pressure to tighten monetary policy comes at a time when bank lending is strong, with non-food bank credit growing at 14% or more year-on-year since December 2025. The deployment has been broad-based across sectors.

This begs the question: Will a rate hike, or even a change in monetary stance from neutral to tightening, suppress this credit upcycle? In theory, it sh...