A Bill seeking to give more operational flexibility to the Reserve Bank of India in the conduct of monetary policy was passed in Lok Sabha on Friday.

The Banking Regulation (Amendment) Bill, replacing an ordinance promulgated on January 23 this year, seeks to amend section 24 of the Banking Regulation Act, 1949 to enable the RBI to specify the Statutory Liquidity Ratio without any floor limit.

In the context of developments in the banking and finance sector and soaring demand for credit, it was no longer necessary to continue the existing floor limit of 25 per cent in the statute itself, Finance Minister P Chidambaram said amid opposition uproar over farmers' killing in Nandigram in West Bengal.

He explained that the regulator needed to have flexibility in this regard for managing liquidity in the system. "It is necessary that RBI as the regulator and the authority vested with powers to conduct monetary policy have the necessary flexibility regarding stipulation of holding of liquid instruments by banks," he said.

As such, the existing floor limit of 25 per cent has to be removed keeping intact the ceiling of 40 per cent as the guidance from RBI, he said.