There is still room for the Reserve Bank of India (RBI) to cut the cash reserve ratio (CRR) for banks, RBI Deputy Governor Subir Gokarn said in an interview to a TV channel.
"When the space opened up for CRR cut, we used it," he said. "That space still exists, and so if we think it is appropriate we will use it."
The RBI cut the CRR, or the proportion of deposits that banks must maintain with the central bank, by 50 basis points to 5.5% on January 24 but kept its key policy rate unchanged.
Gokarn said the RBi would ensure that any steps it takes to address liquidity tightness in the banking system will not destabilise markets.
He said overnight cash rates were under some pressure, but the rise was not dramatic.
The RBI will next review monetary policy on March 15.
The CRR cut in January is estimated to have released Rs 3.2 lakh rore into the banking system.