Traders are increasingly betting on the Reserve Bank of India raising interest rates in October, with oil prices rising and inflation widening, which strengthens the justification for tightening monetary policy, while an expected US interest rate hike adds additional pressure, according to four traders.
On Tuesday, the one-year overnight index swap rate rose 8 basis points to 6.11 percent, its highest level since early June, while the 5-year swap rate jumped 11 basis points to 6.68 percent, according to Reuters.
Traders said the one-year overnight index swaps were pricing in at least three 25 basis point increases in interest rates over the next year. The one-month swap rate, the least traded and most direct measure of interest expectations in October, rose 10 basis points to 5.34 percent.
The one-month swap rate of 5.34 percent indicates a tangible possibility of raising interest by 25 basis points, but these prices reduce the size of the actual possibilities, given that overnight interest rates move below the repurchase rate amid an abundance of liquidity, according to dealers.
October meeting “strongly proposed”
The four traders, who declined to reveal their identities, said that the Reserve Bank of India's interest rate hike in October was almost certain, while some economists presented their expectations for a hike to the bank's meeting scheduled for October 7.
A Citi analyst said in a note on Monday that a rate hike in October “is now the base scenario,” advancing his forecasts from December, in light of the declining suitability of inflation prospects.
He added that core inflation in India witnessed a sharp acceleration; The August reading was more than double its average over the past two years, raising concerns about growing inflationary pressures resulting from demand.
Citi expects inflation to rise in September to 5.7 percent, approaching the 6 percent upper limit of the inflation range allowed by the Reserve Bank of India, which makes it difficult - according to its estimate - for the central bank to keep interest rates unchanged.
Deutsche Bank took a similar step. He brought his rate hike forecast to October instead of December. He pointed to the acceleration of general inflation towards 5 percent and the widening of the scope of core inflation, in addition to the strength of gross domestic product data in the period from April to June, at a time when the US interest rate hike cycle is approaching.
Markets are currently pricing in a probability of more than 90 percent that the US Federal Reserve will raise interest rates by 25 basis points on Wednesday, while expectations of another hike by December are about 50 percent.
Oil pressures
The risk of continued energy price pressures reinforces bets that the Reserve Bank of India needs to raise rates sooner.
Brent crude oil has risen by more than 18 percent over the past two weeks, touching about $110 a barrel on Monday.
The Reserve Bank of India has not yet responded to the shock of rising oil prices by raising interest rates, unlike other Asian economies that are affected by oil prices and have already begun to tighten their monetary policy.
The Bank of Indonesia raised its key interest rate by 50 basis points in May, then another 25 basis points in June, while the Philippines has raised interest rates by 50 basis points since June.
Deutsche Bank said that relative interest rate differentials may become more important in maintaining capital flows to India, which constitutes an additional reason for the Reserve Bank of India to raise interest rates.
The Governor of the Saudi Central Bank (SAMA), Ayman Al-Sayyari, revealed that the number of financial technology companies operating in Saudi Arabia had increased to 371 companies by the end of last August, at a time when cumulative investments in the sector exceeded 30 billion riyals ($8 billion) by the end of the first half of the current year.
Al-Sayari said, during his speech at the “Money 20/20 Middle East” conference held in Riyadh, that the financial technology sector witnessed during the past 12 months “exceptional growth,” with a noticeable development and expansion in innovative activities and solutions.
He added that electronic payments continued to spread in Saudi Arabia, reaching 85 percent of the total payment operations carried out in the retail sector by the end of 2025.
Open banking
The Governor of SAMA pointed out that open banking services have achieved a “qualitative development” by moving from the legislative experimental environment to the licensing stage, pointing out that the number of active users of these services exceeded 337 thousand users.
He explained that the cumulative investments in the financial technology sector, through venture capital and strategic financing, exceeded 30 billion riyals by the end of the first half of 2026, expecting these investments to grow during the next stage.
Al-Sayyari pointed out that two events will be announced after his speech: One of them is at the Gulf level, and the other is related to a large investment in the financial technology sector in Saudi Arabia.
Infrastructure for innovation
The Governor of SAMA stressed that the successes achieved by the financial technology sector were the result of “integrated regulatory and coordination cooperation” aimed at enabling innovation, based on a framework that combines specialized licensing paths, control tools, and a common infrastructure.
According to Al-Sayyari, this approach contributed to overcoming obstacles to entering the market and addressing the sector’s challenges, while maintaining financial stability, stressing the Central Bank’s commitment to motivating innovators and supporting innovative business models in the local system.
He continued that, in light of the escalating global uncertainty, Saudi Arabia has maintained the strength and cohesion of its economy, noting that the stable, advanced and forward-looking regulatory environment has contributed to maintaining investors’ confidence in the Kingdom as a safe, attractive destination and ready for growth.
He stated that SAMA focused during the past year on establishing and developing a common infrastructure available to everyone, accelerating the introduction of new products and services in the markets, in addition to maintaining the stability and comprehensiveness of the financial system.
Stablecoins
Al-Sayyari spoke about the central bank strengthening its cooperation with its counterpart global regulatory authorities regarding stable currencies and virtual assets. With the aim of assessing risks and developing the necessary guarantees, he explained that this cooperation aims to ensure that Saudi Arabia remains a “responsible and balanced party” in the markets for these assets.
He added that the rapid developments in artificial intelligence and modern technologies are leading the financial sector to a “new financial era” based on artificial intelligence tools, the real-time flow of data, and cross-border transactions.
He stressed that these developments require a degree of care and caution, explaining that progress should not only be measured by its speed or size, but also by the level of confidence being built and maintained in the future financial system.
New agreements
He called on regulatory authorities and sector leaders to work to create flexible frameworks that promote innovation, while ensuring stability, stressing SAMA’s commitment to supporting financial stability and enhancing confidence in the financial system in cooperation with regulatory authorities and the financial sector.
During the conference, it was announced that Mada and Hamyan cards had begun to be accepted between Saudi Arabia and Qatar, in a step aimed at enhancing the integration of payment systems in the region, allowing national card holders to use payment cards easily and reliably between the two countries.
In a second announcement, it was revealed that Barq Company had closed a Series C investment round worth $329.5 million, in one of the large financing rounds in the Saudi financial technology sector.
Cross-border payments have come a long way in speeding up transfers, but the underlying infrastructure still faces challenges related to cost, multiple intermediaries, different regulations and liquidity requirements, which limits full benefit from digital development in this field.
Ramana Kumar, head of the stablecoin ecosystem at ADI, says that sending money from a digital wallet may take moments, but the settlement process remains more complex, due to the multiplicity of parties, different working hours, liquidity requirements, and the need to match transactions between systems in different countries.
In an interview with Asharq Al-Awsat on the sidelines of his participation in the second edition of the “Money 20/20 Middle East” conference in Riyadh, Kumar explained that the challenge does not necessarily lie in building a new infrastructure, but rather in enhancing interconnection and integration between existing and emerging structures, noting that stable currencies can play an important role in this transformation.
Cost emerges as one of the most prominent challenges facing cross-border payments. World Bank estimates indicate that the average cost of sending remittances globally exceeds 6 percent of their value, more than double the target level within the United Nations Sustainable Development Goals, which is less than 3 percent.
Kumar believes that the next stage will go beyond the differentiation between traditional and digital systems, and will focus on the extent to which banks, payment service providers, regulators, and various digital structures can work together safely and efficiently, within clear frameworks that guarantee trust and sustainability.
Cost...a constant challenge
Kumar said that the cost remains one of the most prominent challenges facing cross-border payments, noting that its rise imposes direct economic burdens on individuals, small and medium enterprises, and companies operating in emerging markets.
He added that the solution does not necessarily lie in creating a new payment infrastructure, but rather in enhancing interconnection and integration between existing and emerging infrastructure, allowing the different systems to work together more efficiently.
Stablecoins are entering a new phase
He explained that stable currencies can play an important role within this system, but their value is not limited to representing money in the form of digital symbols, but rather extends to providing programmable settlements, which can be integrated with banks, payment service providers, and existing instant payment systems.
In the near term, there are opportunities to use stable currencies in settling cross-border payments, treasury management, and commercial transactions, especially in operations that involve multiple parties and need to match transactions and data between different systems.
But Kumar believes that adopting these solutions on an institutional scale requires more than speed. Banks and regulators need clarity on reserves, recovery, custody, compliance, governance and operational resilience.
He said that legislation and regulatory frameworks “do not come after innovation, but rather provide it with the foundation it needs to grow and expand,” noting that trust and regulatory clarity will be crucial factors in expanding the use of these solutions.
From payments to commerce
Kumar believes that the next challenge is to expand the scope of the use of these solutions and link them to the movement of trade between markets, so that the benefit of the digital infrastructure is not limited to accelerating the transfer of funds, but extends to facilitating the entire trade cycle.
In this context, he referred to the experience of the ADI Foundation, through its partnership with the secretariat of the African Continental Free Trade Area, to develop an African-led digital architecture for trade, combining interconnected payment and settlement systems, reliable trade credentials, and digital trade documents.
He explained that the program targets a market of about 1.4 billion people, and is scheduled to begin implementation in a number of commercial corridors starting in early 2026.
Integration takes precedence over technical competition
Kumar expected that the distinction between the traditional and digital structure of payments will gradually decline in the coming years, with the focus shifting to the ability of different systems to work together safely and efficiently, and within clear regulatory frameworks.
He said that the future of cross-border payments will not be determined by the superiority of one technology over another, but rather by the ability of the entire system to integrate banks, regulators, payment service providers, and digital infrastructures.
He added that the success of this transformation will be measured by the extent of the ability to make transactions smoother and more efficient, while at the same time maintaining the levels of trust on which the financial system is based.
