The Governor of Reserve Bank of India, D. Subbarao on Tuesday assured that RBI’s monetary policy will remain aimed at taming inflation and also be sensitive to growth.

While addressing a press conference in Mumbai on Tuesday after the announcement of the second quarter review of RBI’s monetary policy, the RBI governor said, as an assurance to investors that if inflation trajectory conforms to projections, further rate hike may not be warranted. He said that RBI’s policy will be independent of Government borrowing but variable fiscal deficit during inflation will be taken into consideration while calibrating monetary policy.

He also said that since the rupee exchange rate is dependent entirely on external factors it will not be used as an instrument for managing inflation.

While speaking about the savings bank interest rate deregulation, which is effective from on Tuesday, the RBI Governor said that banks have been given discretion to devise their own policies and plans on their products and rate subject to conditions.

He added that the RBI will be willing to intervene if the banks feel the need for regulatory interference. He suggested that banks should have friendlier policies for savings bank account holders from lower economic households.

The RBI Governor said that the deregulation will be beneficial for the economy as it will also support financial inclusions.