Suppose you took a loan of ₹100 a month ago at 10% interest per month to produce a product worth ₹150 in market. High inflation means that by the time you sell the product it's market price will be more than ₹150, say ₹160. So that ₹100+₹10 will hurt you lesser when you earn ₹160 than when you earned ₹150. The ₹110 you return to lender is worth lesser than what it would have been without inflation. This is how inflation makes loans cheaper, debtors benefit and lenders suffer
@TheNotorious yes bhai your reasoning is accurate💯.in practice, Banks don't always have to lower the interest rate since inflation reduces the cost of borrowing itself, so that creates additional demand for loans. Lowering interest rates would mean adding a layer of icing on another layer of icing, makes the cake too sweet. Economies of scale would work only if loans are not defaulted and lowering interest rate could encourage riskier loan propositions. So in practice banks usually don't lower interest rates .
But this does bring us closer to understanding why govt tries to raise repo rate ( and indirectly interest rate) to bring inflation under control
