The Reserve Bank of India is still accommodative in its monetary policy, but when things are normal, it will stay with the policy cycle, Governor Raghuram Rajan said in his interaction with the media after the policy. Edited excerpts:We are still accommodative. There are obviously both upside and downside risks to consumer price inflation. We have highlighted some of the sources of risks. One could imagine that there could be downside risks from, say, commodity prices, especially oil. But, of course, given where oil is produced, there are also potential upside risks if there are political events that constrain the supply of oil. What we have said is when times warrant , we are prepared to move off-cycle. But, when times normalise, we prefer staying with the policy cycle rather than moving off-cycle.There are some residual uncertainties about what the Fed will do. But, after an in initial bout of volatility, we probably should see Indian markets stabilise. So, it’s not the central factor in our deliberations. On fiscal consolidation As far as the fiscal deficit goes, both the quantum and quality matter and that is an issue the government is fully seized of. I am hopeful that while maintaining the fiscal consolidation path, the government can also enhance the quality of the budget.There will be additional expenditure but it will be offset presumably either by additional revenue or cuts elsewhere so that the fiscal consolidation path is maintained.I think it’s clear that we are in the midst of a recovery. Now, there are areas of weakness. Agriculture is growing relatively weakly because of the monsoons, allied activities – dairy, etc — are growing more strongly. But, as a result, rural demand is somewhat weak and you see non-durable consumption, for example, relatively weak. Set against that, capital goods (segment) has grown fairly strongly, public investment seems to be growing strongly. With the kind of investment that is contemplated, construction may start picking up and that would be helpful.Thus far, we have barely seen half the interest rate cuts since January pass through. We are working with the banks on a new methodology to determine base rates. I think that if you look at one to three-year deposits, banks have already cut significantly more than has been transmitted through the base rate, so in that sense, there is room building up for banks to transmit more.Many actions have been taken, including splitting the chairman and the CEO posts of banks, appointing some private sector players as CEOs. The bank board bureau is being set up. We, together with the government, are trying to change the governance process of banks, move towards cleaning up the bank balance sheets and appropriate recapitalisation and then they will be in a position to do the kind of lending the economy will need as the recovery picks up steam.On some dimensions, we are ahead of China. I think in terms of the degree of competitiveness within the banking system, we have taken some steps which put us ahead. But in terms of the size of the economy, in terms of the extent of external trade, in terms of denominating trade in renminbi, I think they are much ahead of us.The first part of the process was to give banks more powers and more flexibility to deal with them and the idea is to put the real assets back on track with whatever needs to be done. Given that banks have more powers now, we can now be a little more careful about recognition. We are also looking at how the existing facilities are being used to make sure we are not kicking the can down the road. —