Barely a month after the bank rate cut, the Reserve Bank of India on Tuesday favoured further reduction in lending rates and interest rate spreads of commercial banks, especially for small scale and agriculture sectors.

"Top ranking companies are getting credit at PLRs. But there is a need to look at rates and spreads," RBI Deputy Governor Vepa Kamesam said.

He said that although RBI will not direct banks, it was up to them to reduce lending rates further.

This was necessary for the small-scale industries and agriculture sectors, he said.

Kamesam dodged queries on interest rate movement saying: "You have seen the interest rate structure and you know where they are."

He said lending rates of banks are determined by various aspects of the market. "Now, largely it is the market that determines the rate," he added.

RBI had reduced its bench-mark bank rate by 0.25 per cent to 6.25 per cent in the busy season Credit Policy of October.

The central bank has slashed bank rate four times in the last three years to bring down cost of credit.

Banks have also brought down PLRs in tandem with bank rate cuts, but the lending rates still remain as high as 10-11 per cent.

Commenting on the other monetary indicators, Kamesam said: "There is adequate liquidity."

He said the growth in food credit, an indicator to the growth prospects of agriculture sector, was 'alright.'

"As of now, this looks all right. The drought had impacted food credit growth in between. But now it is looking up," he said.