Mumbai-based NBFC Tata Capital expects to protect its margins amid rising interest rates, supported by a higher proportion of floating-rate loans on the asset side than on the liabilities side.
Rajiv Sabharwal, Managing Director and Chief Executive Officer of Tata Capital, said the company has 66% of its assets linked to floating rates, compared with 48% of its liabilities, giving it some flexibility to pass on higher borrowing costs to customers.
The Reserve Bank of India’s (RBI) recent 25 basis point rate hike and expectations of further increases this financial year remain key factors shaping its outlook.
Looking ahead, Tata Capital is evaluating its capital requirements for the second half of FY28 and will decide on the timing and nature of any fundraise based on market conditions and business needs.
In July–September 2026 (Q2FY27), Tata Capital reported net interest income of ₹3,696 crore, net profit of ₹1,660 crore, and a net interest margin of 4.9%.
This is an edited transcript of the interview.
Question
Following the RBI’s 25 basis point rate hike, how much further could your borrowing costs rise, and what would be the impact on margins?
Answer:
We have seen a 25-basis point hike, and the consensus in the market is that we could see another 50 basis points of hikes in this financial year. As far as our book is concerned, about 48% of our liabilities are floating-rate, and about 66% of our assets are linked to floating rates. To that extent, we have a natural advantage. In case there is an increase in the cost of funds, we will be able to pass it on to our borrowers and ensure that our margins remain intact or are not significantly impacted.
Question
Your floating-rate exposure is around 66% of assets, compared with only 48% of liabilities. Could rising interest rates actually benefit your margins?
Answer:
Our endeavour at the moment is to be fair to our customers and pass on the impact of price hikes. You’re right; we have a natural advantage in a rising-rate environment.
Question
With flexi loans accounting for around 2% to 2.5% of your book, how much could the proposed regulatory changes affect yield growth? Could you share some numbers?
Answer:
We’ve been engaging with the regulator on this and stressing that this product is good for customers because it allows them to pay interest only on the amount they borrow. We’ve also looked at the past performance of this book. About 90% of this portfolio serves SME and micro, small and medium enterprise (MSME) customers. The flexi-loan portfolio forms about 2.5% of our book.We have got alternative products in the pipeline. Some are already in motion, while others will become active from next month. We believe we will be able to absorb the impact of any changes introduced by the regulator.
Question
What is your assessment, are these tools enough to give the Reserve Bank some time, or are more steps needed?
Answer:
We always monitor what makes the most sense for us. An equity raise is important, and we would like to time it depending on market conditions and our requirements. We also consider subordinated debt, which can help boost our capital adequacy.We believe that we may need capital in the second half of FY28, but we’ll continue to assess our requirements and ensure that our debt-to-equity ratio remains within a reasonable range as we approach the market. However, this is a decision that the board will take at the appropriate time.
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Tata Capital eyes margin stability amid rate hikes, weighs FY28 capital raise
