The Reserve Bank of India [Get Quote] said on Tuesday it would emphasise on price stability so that there is possibility of lower interest rates in the medium term.

"Interest rates are market determined. Our efforts are to administer the system so that we have price stability. With greater stability, it is possible to have lower interest rates in the medium term," RBI Deputy Governor Rakesh Mohan said at a conference on Cash, Treasury and Risk Management in India organised by EuroFinance.

He said interest rates can fall in the medium term if intermediary and transaction costs fall. Mohan said the central bank aims to maintain price and financial stability.

Uncertainty about global oil prices still persists even though they have declined by about 25 per cent from July's record highs, he said. "We have said in the mid-term review the high level of oil prices continues, which it does. The uncertainty remains," Mohan said.

"Our aim is to bring inflation down over a period of time... We don't target inflation. Given that international inflation is around 2 to 3 per cent, and ours is around 4 to 5 per cent... we have to constantly strive to bring it down," the RBI Deputy Governor said.

The Reserve Bank in its mid-term monetary review raised the repo rate, at which commercial banks borrows from the central bank, by 0.25 per cent to 7.25 per cent to dampen inflationary expectations due to credit growth.

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