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RBI says to maintain current rates environment

The Reserve Bank of India said on Tuesday that it would seek to maintain the current interest rate environment and would look at the possibility of lower medium and long term rates over time.

In its annual report for 2000-01 (July-June), the RBI said it would continue to regulate the supply of funds in the banking system through its open market operations, including two-way sale/purchase of treasury bills, and further reductions in banks' cash reserve ratio as and when required.

The central bank follows a July-June accounting year while India's fiscal year runs from April to March.

The RBI said it should be possible to maintain the current rates policy unless circumstances change unexpectedly or current problems in some segments of the market are not resolved soon.

"The policy stance is flexible in case the underlying inflationary situation turns adverse or there are unfavourable and unexpected external developments," it added.

The RBI has followed an easing policy this year. It has cut the benchmark bank rate, used by commercial banks to set their rates, twice by a total of 100 basis points to 7.0 per cent.

It has also cut banks' CRR twice by a total of 100 basis points to 7.5 per cent.

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