Ten-year bonds have barely moved in 2025, despite four interest rate cuts and record debt purchases by the central bank. Interest rates are likely to remain between 6.50 and 6.75 percent this year, said Shailendra Jhingan, head of finance at India’s second-largest private lender. He suggests there is little room for further gains from current levels around 6.60 percent.
“There has been a structural change at the macro level with savings shifting towards equities compared to fixed income,” Jhingan, who has about three decades of trading experience, said in an interview in Mumbai. Revised investment rules have also made banks more reluctant to buy long-term bonds, he said, because the rules limit their ability to shift securities between trading books.
Domestic investors bought more than $80 billion worth of stocks in 2025, driving gains in benchmark stock indexes for the 10th straight year, according to Bloomberg data, despite record outflows from abroad. At the same time, tax changes in recent years have reduced the appeal of debt mutual funds, while allowing pension funds – major holders of long-term bonds – to invest more in equities.
Indian government bond yields have risen by about 35 basis points since late May, keeping borrowing costs high after the RBI cut rates by 125 basis points in 2025. The scope of further easing is limited, Jhingan said, keeping pressure on an economy facing the toughest US tariffs in Asia.
Supply pressure is expected to increase in the financial year starting April 1, he said. Jhingan estimates the federal bond sale at ₹16.5 lakh crore ($183 billion) and the sovereign issue at ₹13.5 lakh crore, taking the total debt offering to around ₹30 lakh crore. That’s up from ₹27.5 lakh crore this year.
The country’s 10-year government bond yields closed three basis points higher on Monday after state governments announced a massive debt sale of ₹5 lakh crore for the current quarter, almost double the amount sold in the previous quarter.
Over the longer term, relatively muted interest rate moves despite large liquidity injections reflect improved risk management, Jhingan said. He cited a phase in 2016, when a surge in banking system liquidity caused yields to fall before an abrupt reversal.
Banks have learned from that experience and are “behaving in a more mature way,” which explains why interest rates are not falling, he said.
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Published on January 6, 2026
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