Home and Car loan borrowers may have to wait a while before their interest burden starts easing, with the Reserve Bank of India (RBI) keeping policy rates unchanged.

The CRR cut releases Rs.32,000 crore of funds from their reserves to banks, which had been reeling under a shortage of funds for over a couple of months. Banks have been borrowing more than Rs.1 lakh crore from the RBI since mid-December, which touched a peak of Rs.1.5 lakh crore in the recent weeks.

Since March, 2010, RBI was on a rate hike spree, hiking repo (at which RBI lends to banks) and reverse repo (which it pays on overnight deposits of banks) rates by 3.75 % and 4.25 % in 13 tranches to 8.5 per cent and 7.5 %, respectively, in its fight against inflation.

"The positive side is RBI focusing on growth indicates that interest rates are on a downward trend. But one has to wait to see it become a reality yet," said Aditya Puri, managing director (MD), HDFC Bank.

Usually, lending rates take cue from the fall in deposit rates, which sets the cost of funds for banks. The CRR cut reduces the cost of funds of banks to an extent and enable them to cut deposit rates. Amrinder Gill Ki Samjhaiye

"There is a scope for slashing rates of some fixed deposit slabs, and lending rates could be adjusted in line for some sectors (of the industry) that are experiencing good growth, where the non- performing assets (NPAs) are low," said Pratip Chaudhuri, chairman, State Bank of India (SBI).

"However, if the government borrowing crowds out private borrowers, then there is no likelihood of lending rates coming down soon," Chaudhuri added.

The Centre has announced an additional borrowing programmes adding up to Rs.92,872 crore for the current fiscal, already crowding out private borrowers, including corporates. It was done in a bid to compensate for the fall in revenue collections and the public sector divestment programme that could not take off. The Centre is set to borrow over Rs.5 lakh crore against the budgeted level of Rs.4.17 lakh crore.

The apex bank, which also scaled down its credit growth projection to 16 per cent from 18 per cent earlier, said, "The deceleration in non- food bank credit is explained, to a large extent, by the expansion in the net bank credit to the government, which increased at a slightly higher rate of 24.4 % as compared with 17.3 % last year," RBI said.

RBI also brought down its economic growth projection for 2011-12 to 7 % from its earlier projection of 7.6 %, but retained its annual inflation projection by Marchend at 7 %.

"The RBI move will act as a stimulus to growth. For the real estate industry, there won't be an immediate effect on borrowing.

However, we could expect a reduction of interest rates in the months ahead," said Kamal Khetan, MD, Suntech Realty.