Indian Consumers will be happy to know that finance ministry, along with Reserve Bank of India (RBI) and the Indian Banks Association (IBA) are presently in talks to bring interest rates further down.

The rate cut are expected to reflect in segments like home, auto and personal loans.

An official in the finance ministry, who do not want to be identified said, The interest rates are expected to drop further to its lowest if the downward trend in inflation continues. The rate of inflation is soon expected to come down to 3% because Key monetary and policy rates of the RBI are also at their lowest in many years. But, the official does not disclosed that how much time it would take.

Experts believe that the proposed move will definitely spur demand in housing and other rate-sensitive sectors such as automobiles. In addition, it would also help provide some support to declining demand as it could increase consumption in general segments.

It be noted that Last fiscal in September, the rate of interest on home loans was in the range of 9.25% to 12%, but due to RBI's smart move for rate reduction and lower demand has caused the rate to drop to 8-11%.

However, at present, prime lending rates (PLR) of most of the banks are in the range of 11.5% and 12.5% while the same was between 10.25% and 11.50% as on April 1,
2006.

A source familiar to latest move said, the fresh rate cuts would be applicable to the existing as well as to new borrowers, as a cut in the PLR would call for a corresponding reduction in rate of interest on loans linked to it.

It may be noted that almost all bank loans are linked to the PLR, and every rate fall would really affect the interest rate, which consumer is paying, he quoted.