Mumbai, Jan 13: Borrowers may see a softening in interest rates after march if the Reserve Bank keeps all key rates unchanged in the coming policy review later this month, say bankers.

"We expect the reserve bank policy to be stable in the third quarter review with no major change in key rates," Bank of Baroda executive director V Sanathanaraman said.

Finance Minster P Chidambaram had said that he would like to see public sector banks to reduce interest rates, it will be difficult to reduce it before march due to year-end considerations, he indicated.

Bankers feel the reduction will be put off if the Apex Bank effects another round of hike in the Cash Reserve Ratio (CRR), looking at possible inflationary pressures emanating from high global crude oil and food prices.

Leading housing finance company HDFC chairman Deepak Parekh expects the interest rates to cool down only by the Q1 (April-June) given the apex bank does not increase CRR.

"Lending rates may fall down by 25 basis points in first quarter of the next fiscal (April-June) if RBI does not hike the CRR rate," Parekh said.

CRR is the amount of cash banks need to park with RBI, which does not pay any interest on such deposits.

The CRR presently is at 7.5 per cent following a 2.5 per cent hike in the last 12 months.

With government borrowing programme almost over, the liquidity in the last quarter will be comfortable, Santhanaraman said.

Indian Banks' Association (IBA) chairman Mbn Rao said that liqudity was sufficient in the system to meet credit and investment demand.

"Investment has overtaken credit...Around Rs 3,20,000 crore is there in the system while 1,60,000 crore has been credited," Rao, who is also the CMD of Canara Bank said.

"There is a need for softening of unusually high interest rates," Rao had said adding the asset and liability committee of the bank will take a call on reducing rates.

Yes Bank managing director & CEO Rana Kapoor expects no surprises from the policy review on January 29 even though he feels there was a downward bias on interest rates.

He, however, rules out a possibility of a CRR hike.

- "There should be no change in the policy...It at all it is the market building itself for interest rates to come down," he said.

Kapoor expects a RBI action latest by April to effect at 0.5 per cent reduction in interest rates.

"The recent Index of Industrial Production (IIP) figures show a slowdown and it is time to re-stimulate the economy," he said.

While public sector banks are in agreement with the finance minister that the interest rates should move downward, they would wait for the January policy review signals to decide which way to go.

"We will look at the right signals and examine the RBI policy in January or in April before taking a call," Punjab National Bank chairman K C Chakraborty said.

"Our job is too look at the policy, understand the signal of the regulator and respond to them appropriately," he added.