Rajan says banking system liquidity balanced

MUMBAI (Reuters) - Cash conditions in the Indian banking system are balanced and the central bank will inject long-term funds if needed, said Governor Raghuram Rajan on Tuesday.

Interbank liquidity tightened sharply in November with banks seeing large amount of deposit withdrawals by the public for festival spending. That has created a shortage of funds as this cash typically comes back to banks after a lag of few months.

Tight liquidity was one of the factors to push up the benchmark 10-year bond yield 15 basis points in November.

Rajan was speaking to analysts at a teleconference after announcing the monetary policy statement, where he kept the policy rate unchanged at 6.75 percent.

On India's growth prospects, RBI Deputy Governor Urjit Patel said the economy was on a recovery path and is expected to pick up pace going ahead.

(Reporting by Neha Dasgupta and Suvashree Dey Choudhury; Editing by Sunil Nair)