Mumbai: Reserve Bank of India (RBI) today (Aug 14, 2004) reiterated that it will take measured steps to contain inflation, which has reached a high level of 7.61 per cent, and pointed out that the recent rise in the bond yields is not likely to impact the Government's borrowing programme.

RBI deputy governor Rakesh Mohan also asked banks to step up their respective Investment Fluctuation Reserves (IFR) and cautioned them while investing excessively in Government securities.

Analysts said this statement by Mohan comes on the backdrop of uncertainties in the interest rate scenario.

Mohan, on the sidelines of a seminar, told reporters that annual turnover of G-sec market is double the GDP (Gross Domestic Product) of the country and probably the second largest in Asia after Japan.

On the inflation, he said, "We hope to continue to keep the extent of inflation lower than before. Price stability is also a key concern for a central bank as we have been maintaining in all the annual policy statements."

"The average inflation in 1997 was seven per cent and between 1997 till now, it averaged at 4 to 5 per cent.

Today people get upset if it reaches a level of over seven per cent. For almost 30 years, we had an average inflation of seven per cent so this is an encouraging sign," he added.

Asked about the impact of rise in yields on borrowing programme, Mohan said, "We have had no difficulty till date and there is ample liquidity in the financial system."