RBI may cut interest rate further

Hinting at further cuts in key rates to spur consumption in the economy, the Reserve Bank of India on Friday said it would continue to ensure that money supply was easy.

"There is plenty of liquidity in the system and we want to assure that it will be maintained," RBI deputy governor Usha Thorat said, when asked by reporters if the central bank would change its monetary policy in view of the falling rates.

The RBI has been cutting the key rates at which it lends (repo) and borrows (reverse repo) funds from banks in the short-term, with the latest reduction being in March.

A cut in rates would prompt banks to reduce interest rates on loans, stirring demand for loans that would in turn lead to increased consumer and corporate spending.

The central bank will take up its monetary policy for a quarterly review on July 28.

Replying to a query whether India's growth prospects would be affected due to the failing monsoon, Thorat said it was too premature to comment. "RBI will make a detailed assessment in July quarterly review of the economy," she said.