Reviewing the current state of the Indian economy, bankers hint at a rate cut of 50 to 75 basis points on lending as well as deposit rates.

With inflation rate almost touching zero and economy showing signs of revival, interest rates are likely to decline in the next two to three weeks. Bank of India's Chairman and Managing Director, T S Narayanasami said, "Given that the inflation is low, lending rates may go down further by 0.5% in the next two to three weeks and deposit rates by 0.5-0.75%. Banks will bring down their interest rates in line with a reduction in cost of funds."

Chairman and Managing Director of Bank of Baroda, M D Mallya said that the current macro economic circumstances are also sending signals of rate cut. He further informed that his bank would announce any further cut after reviewing the market conditions.

"There surely exists a scope to bring down the rates further. Given the current macro-economic signals, such as the low inflation, deposit and lending rates are tend to drop further in the period ahead," Mallya said.

The Reserve Bank of India has been following a soft interest rate regime and cutting down policy rates. Responding to the latest move by RBI, almost every PSU banks have slashed down their benchmark prime lending rates (BPLR) by 50 basis points. In fact some banks like PNB have also revised down their interest rates for term deposits up to 3 years.

In fact government also asked state run banks to cut their interest rates in order to facilitate cheaper access to credit to the industry.