New Delhi: Favouring a soft interest rate regime, Reserve Bank of India (RBI) on June 13 said bank rate would be cut if the liquidity conditions demand so.

"If the liquidity conditions change in a way which require bank rate cut, we will cut it," RBI Governor Bimal Jalan, who is in Delhi to meet Finance Minister Yashwant Sinha, told reporters.

He, however, said liquidity conditions are comfortable now. "We are maintaining adequate liquidity. The interest rates are soft. Inflation is low at 1.56 per cent. We have said that as long as this continues, we shall maintain soft interest rate policy."

"Once it is required, it (bank rate cut) will be done. The idea is that it has to be done in such a way that it is sustainable," Jalan said.

RBI had reduced bank rate to 6.5 per cent last fiscal. Jalan had also stated in the last credit policy that bank rates would be cut by another 0.5 per cent but had not given any time frame.

He also said there was no problem in carrying out government's borrowing programme as the market was favourable.

Government targets to mop up over Rs 1,40,000 crore in the current financial year.

PTI