Bankers said the RBI had the option of either increasing the amount it would absorb through the reverse repo window from the current maximum of Rs 3,000 crore or remove the ceiling altogether.

This would have the effect of raising the overnight call rates from below 1 per cent levels to above 6 per cent, which is also the reverse repo rate. Ideally, the monetary authority would prefer to have the overnight rate in the reverse repo-repo rate band -- currently 6-7.75 per cent. The banking system is estimated to be flush with about Rs 40,000 crore of liquidity.

Reverse repo (repurchase) is a means by which the RBI absorbs liquidity from the banking system by selling government securities for a day. Repo is a mechanism by which the central bank infuses liquidity into the banking system against receipt of government securities.

The reverse repo ceiling was imposed in March when liquidity in the banking system was tight and the overnight call rate had touched a peak of 80 per cent.

The other issue likely to be in focus is the strong foreign currency flows. The central bank could consider a further reduction in the ceiling on interest rates banks can offer on foreign currency deposits. The RBI had earlier this year reduced the interest ceiling on non-resident Indian deposits by 50 basis points.

Measures are also being considered to resolve the RBI's problem of availability of adequate government securities with it for liquidity absorption. The government might also issue special securities to the RBI in due course of time, the sources said.

The RBI is also likely to use the quarterly review to announce a roadmap for reducing the statutory liquidity ratio from the current 25 per cent in tranches of 0.25 per cent over a period of two to three years. Statutory liquidity ratio is the proportion of deposits banks have to invest in government securities.

The RBI, however, is expected to keep both the reverse repo and repo rates unchanged, with inflation within the central bank's target of 4-4.5 per cent and credit growth below 25 per cent. Money supply at over 21 per cent is the only monetary aggregate much above the target of 17 per cent.

The concerns over rising oil prices have been partly offset by a sharp appreciation of the rupee (about 7 per cent since the beginning of April 2007).

Bankers said the talk of the RBI signalling a lowering of interest rates was futile as it was not yet clear that the measures taken so far had totally addressed the concerns of overheating of the economy.

Bankers have ruled out the possibility of any increase in cash reserve ratio (CRR), which is the proportion of deposits (currently 6.5 per cent) banks keep with the RBI.

They said a higher CRR on incremental deposits beyond a cut-off date was also unlikely as it would act as a penalty for banks efficient in raising deposits. The impact of an increase in CRR on the entire deposit base affects all banks in equal measure.