Mumbai: The Reserve Bank has done a balancing act amid weak economic conditions by increasing liquidity that can help bankers cut lending rates, and at the same time let it continue with its nearly three-year-old fight against inflation, top lenders said today.

They hinted at a marginal reduction in lending rates following cut in the Statutory Liquidity Ratio (SLR) - the amount of deposits that have to be invested in government bonds and other liquid assets.

RBI reduced the SLR by 1 percent at the quarterly monetary policy review this morning.

The nation's largest lender State Bank of India hinted at lowering lending rates to retail customers.

"The one percentage point reduction in the SLR will release an additional 10,000 crores for SBI. That coupled with 6,500 crores released through the reduction in export refinance, may lead the bank to cut lending rates in retail," Chairman Pratip Chaudhuri told reporters at the customary post-policy press briefing at the RBI headquarters.

It is always better to deploy money at 10.50 percent return than the average of 7.5 percent which the SLR gives, Chaudhuri said.

He further said the bank's asset liability committee (Alco) will meet either to take a call on both base rate as well as whether to cut spreads in select retail products.

RBI Governor Duvvuri Subbarao cut the SLR to 23 percent, thereby releasing around 68,000 crore of additional liquidity into the system, even as he left all the key interest rates unchanged in the anti-inflationary stance.

Accordingly, the repo or the short-term lending rates and the cash reserve ratio (CRR)- the portion of deposits that banks park with RBI without interest - at 8 percent and 4.75 percent, respectively.