The Reserve Bank of India (RBI) is comfortable with the current liquidity situation at Indian banks, deputy governor Subir Gokarn told reporters on Monday.
Banks' cash conditions improved substantially this month on the back of government spending, pushing the overnight benchmark reference rate or Mumbai Interbank Offer Rate (MIBOR) to a more than one-year low of 7.22 percent last week.
However, cash conditions may tighten from the next week due to advance tax outflows.
"For the last several weeks, liquidity levels have been in our comfort zone. If signs of stress emerge particularly, if they persist, then we will take that into account," said Subir Gokarn, a deputy governor at the RBI.
He also said India's current dollar reserves are not "uncomfortable".
India's dollar reserves have fallen to $290.46 billion from $320.79 billion a year ago on dollar sales by the central bank to protect a weak rupee.