Poddar also said, "Given the current global environment of tight liquidity and the central bank's move last week to ease liquidity conditions, any further cash-reserve ratio hike is firmly ruled out.''

Indian banks borrowed money from the central bank on every trading day in the past three weeks. The rate at which banks lend to each other overnight has averaged 10.1 percent this month, up from 8.8 percent in August. It rose to 15.63 percent on September 19th, the highest since March 2007.

RBI had also notified a relaxation on external borrowing norms for infrastructure companies. This relaxation is expected to strengthen rupee along with improving inflow of funds. The borrowing norms came after the last week's measures by RBI, which saw it making NRI deposits more attractive and providing additional liquidity in the system.

A senior executive of a large PSB said," With a slowdown in the financial sector and real estate and large companies considering putting on hold new investment decisions, an interest rate hike may adversely impact cement and steel, among other sectors."

The central bank predicted in July that the economy would grow by 8 percent this year, revising downward its earlier forecast of as much as 8.5 percent. The monetary policy is expected to begin easing from April 2009.