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Interest rates have started coming down. Large public sector banks like SBI and Canara bank have slashed key lending rates twice in the last one month and home and consumer loan rates have been cut across the board. And all this without the RBI signaling any rate easing in its last monetary policy. While the RBI did urge banks to consider changing rates without any direct cue from itself and the Finance minister has been requesting bank chiefs to lower rates, there could be a couple of other important reasons why banks have started cutting rates proactively.  One, growth is slowing down. In early 2007, the furious pace of credit growth was a problem. Now that the central bank has effectively cooled this tear away credit growth with higher interest rates, we have come to the other end of the spectrum because growth could be lower than desired: The economy is slowing, many sectors are witnessing lower off-take and banks do not want to be in a situation where their bread and butter is affected by their inability to lower interest rates pending fiat from the RBI. Therefore, they are simply doing what is best for their own business, lowering the price of money: Now, why have they not waited for an explicit cue from the central bank this time? Perhaps because of inflation. Even a casual glance at commodity prices will tell you the story. Crude is $100 a barrel, gold is at a high of $950 an ounce and silver at a 27-year- high, base metals have had an incredible run of late and even soft agricultural commodities are stubbornly high.  The US Fed, staring at a recession, does not have the luxury of looking at inflation but the RBI does. Particularly so, with this being a pre-election year and the Finance Ministry is surely not missing any opportunity to remind it of the fact. It is entirely possible then that another couple of monetary policy meetings may pass without the RBI pressing the rate trigger. Banks don’t want to keep waiting only to realise halfway down the year that slower growth has started denting credit off-take in a serious manner. That is the way it should be: the RBI does what it thinks is good for the nation, balancing inflation and growth, while banks do what is good for their business of lending. Generally interest rate cuts [...]