Borrowers hoping for some relief on EMIs may have reasons to cheer. State Bank of India, the country's biggest lender, on Friday indicated that it could cut lending rates outside the Reserve Bank's policy review cycle.



"There is real interest rate for the depositors and it is the right time to make deposits a little cheaper. And only then going forward we can look forward to bringing rates lower for borrowers," said SBI's chief Arundhati Bhattacharya. (Watch Video)



Her comments came on a day when the lender cut interest rates for bank deposits. Lower deposit rates are generally considered to be a precursor to lowering of lending rates.

(Read:SBI Cuts Retail Fixed Deposit Rates By 0.25%)



A number of big lenders have cut their deposit rates over the last few days in a signal that borrowing rates may soon start trending lower. Lower deposit rates reduce the cost of funds for lenders, helping them lower borrowing rates.



Ms Bhattacharya told NDTV that the lowering of deposit rates was due to easing of liquidity conditions and weak credit growth. In the September quarter, credit offtake hit a multi-year low, signaling weak demand in the economy.



State Bank of India cut its long tenor deposit rates by 0.25 per cent. Earlier this week, the country's two largest private sector lenders - ICICI Bank and HDFC Bank - had also lowered their deposit rates.





HDFC Bank's Managing Director Aditya Puri also on Friday said that once the cost of deposits come down, following its the December 1 cut in short-term deposits, the bank will eventually pass on the benefit to borrowers.

(Read:HDFC Bank Hints at Lending Rate Cut by March)



Renewed expectations of a rate cut come at a time when the central bank gave a clear signal that it may start monetary easing early next year.





Though RBI chief Raghuram Rajan kept rates unchanged in its December 2 review, he said "if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle."Samiran Chakraborty, chief economist at Standard Chartered, said that the RBI is most likely cut rates in February. "Our view is that if not in February, the RBI will definitely cut rates in April," he added. (With Agency Inputs)