Even though the government is trying hard to control economic slowdown and banks are revising down their interest rate, there are chances that new borrowers may still not have any inclination towards these rates.

The financial crunch has made times difficult even for a simple borrower who checks a reduction in his income, as a result of which he is unable to repay his loan. The default rate in the country is rising and therefore banks have become hesitant in their lending.

Banks are revising their lending norms by tightening the eligibility criteria and raising the down payment on loans. This is likely to depress the loan demand even if the interest rates are falling.

Abdul Majeeth, Auto analyst at PricewaterhouseCoopers said, "Current global uncertainty and credit crunch will not allow customers to enjoy the benefit of lower lending rates, since banks will now become cautious about lending."

Banks are increasing their down payment on home loans in order to shrink the losses that result due to a default. Most of them have raised the margin money to as high as 40%.

SBI officials said: "We have increased the margin requirement (down payment) to secure our advances from any price fluctuation in the market. This will also ensure that only reasonably sound and creditworthy borrowers get access to loans."

"The bank is taking stringent measures to ensure that only borrowers with sound repayment capacity are extended loans," said an official from ICICI Bank.

Also the property and cars prices prevailing in the market are still too high to attract consumers. Most of the demand for consumer loans comes from the middle-income group which has been curtailed by the high prices. Sales figures are certainly coming down in the present scenario. India's No. 1 car maker, Maruti Suzuki, have increased the prices of most of its models last month.

Sanjeev Shukla, Marketing Head of Ford India, said: "US crisis has had an impact on us. Though interest rates are coming down, we will not be able to get back to the earlier levels of sales."

Besides banks are also concerned about the extent of money that will actually flow down to firms and consumers from banks.

State Bank Chairman O.P. Bhatt and ICICI Bank Joint MD Chanda Kochhar feel that economy may again face a liquidity crunch in the short-term and therefore there is an essential requirement of adequate funds in the system.