Inflation has declined somewhat over the last two quarters providing greater room for interest rate cuts. From a policymaker's perspective, the emphasis has gradually shifted from combating inflation to propelling economic growth. Acknowledging the role that lower interest rates can play in economic recovery, the Reserve Bank of India (RBI) believes that there is room for banks to reduce their lending rates further and expand their credit, says the study.
While consumers feel though interest rates have definitely come down, they have expressed pessimism that they will continue to fall further over the next 12 months. In response to lower interest rates, overall sentiment about observed change has remained somewhat optimistic since February 2009.