"I do believe that in the next quarter or starting next quarter interest rates should see a downward trend," said Chanda Kochhar, managing director and CEO, ICICI Bank. "However, it would be difficult to say how fast, how sharp, how early," she said.
A lower repo rate brings down the borrowing costs for banks, prompting them to slash interest rates for final home, auto and corporate borrowers. The RBI's third quarter policy review is due on January 29.
"Banks will cut lending rates only after RBI cuts the repo rate because cost of funds for lenders is still high," said M Narendra, chairman and managing director, Indian Overseas Bank.
Experts believe that sliding gross domestic product growth and cooling inflation will encourage RBI to cut rates in January.
“This (falling GDP growth and inflation) is likely to prompt the central bank to ease its repo rate by 0.25% points in the January review and perhaps again by a similar magnitude in March,” said Abheek Barua, chief economist, HDFC Bank.