Borrowers could see better days ahead as banks are expected to cut lending rates following the RBI's decision to cut short term lending rate as well as unlocking Rs 18,000 crore by slashing cash reserve ratio (CRR) by 0.25 per cent.

Soon after the Reserve Bank unveiled its mid-quarter review of the monetary policy, several bankers hinted that they may consider rate cut in their ALCO (Asset Liability Committee) meeting.

RBI Governor D Subbarao in the third quarter monetary policy review surprised the market by cutting short-term lending rate called repo by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by similar margin to 4 per cent, releasing Rs 18,000 crore primary liquidity into the system.

Commenting on RBI's action, SBI Managing Director A Krishna Kumar said "a rate cut is likely. Rates on advances and deposits could come down simultaneously. The RBI's action is positive".

Indian Overseas Bank executive director A K Bansal said the RBI's action will result in moderation of interest rates in the coming days.

Both lending and deposit rates are expected to see a downward revision which will improve growth prospects, he said.

According to Canara Bank executive director A K Gupta, the bank would consider interest rate cut in the light of RBI policy action.