Rupee and bonds weakened on Thursday after the US Federal Reserve signalled it may increase its policy rates at the next meeting in December.

Rajan also said weak results from India's corporate suggested final demand is yet to pick up strongly.

The new bond was changing hands at 7.72 per cent.

The RBI targets inflation at 6 percent by January 2016 and 4 percent for 2017/18.

India's banks rely on overnight borrowings to fund longer-term lending.