India's central bank on Tuesday left its key interest rate steady at 8 percent, following its first meeting after a landslide election win for the Bharatiya Janata Party (BJP).
In a statement, the Reserve Bank of India (RBI) said further policy tightening would not be warranted if the economy continues on a disinflationary path.
At the same time, the RBI took steps to raise the availability of credit, reducing the mandatory amount of bonds lenders must park with the central bank - called the statutory liquidity ratio - by 50 basis points to 22.5 percent of deposits from mid-June.
The RBI has raised interest rates three times since September to help contain inflation.
Fighting inflation is expected to remain the central bank's priority and that could put it at odds with India's new government, led by Narendra Modi, which has pledged to revive the country's growth prospects.
Data released last week showed India's economy grew an annual 4.6 percent in the first quarter to mark a second straight fiscal year of sub-5 percent growth.