Rising interest rates are generally negative for corporate earnings, as borrowing costs become more expensive, while consumer spending slows. However, as with most things in life, there are exceptions to this broad view: history shows that banks can benefit from a rising interest rate cycle, as long as that cycle’s duration and extent remain moderate.
Another important factor to consider is the positive impact that the National Credit Act has made – banks are now much more judicious in their lending practices. Growth in bank financing across various retail lending products on average has remained in the mid-single digits, compared to high teens before the introduction of the Act. It has been even more subdued during the Coronavirus crisis, often lower than inflation .