The reserve Bank of India (RBI) has said that it believes that there is adequate level of liquidity in the banking system in India.

The comments from RBI deputy governor KC Chakrabarty came amid concerns that the increased interest rates in the country have died the banking sector of much needed liquidity. When asked if the RBI is considering cutting the cash reserve ratio (CRR) to ease liquidity crunch, he said that the central bank could use any of its tools at any time.

K C Chakrabarty , deputy governor, RBI said: "There is sufficient liquidity in the system. As for cash reserve ratio, the text books say that it is one of the tools that can be used... you should wait for December 16."

The RBI is expected to make any changes only after the midterm policy review on December 16. The liquidity in the banking system in expected to further reduced around mid-Deceber when banks remit advance tax payments made by corporates to the government.

The RBI had last reduced the CRR in May 2010 and it has been pegged at 6 per cent since that time. However, the policy rate has been raised 11 times during the same period or 325 basis points.