Further reduction in interest rates at this stage will not be of much help to the banking industry, India's former Chief Statistician Pronob Sen said in a panel discussion on CNBC-TV18.

According to Sen, the RBI has limited ammunition in terms of what it can do because fixed capital investment is not going to come back in a hurry. As for working capital, it would again depend on demand and not so much on interest rates.

"So RBI’s ability to manipulate rates is no longer effective in the current scenario," Sen said , adding that the only thing the RBI could do for now was to ensure financial stability and adequate liquidity in the system.

Sen said banks were under pressure because the appetite for loans was very low at the moment.

"They have got a huge amount of liquidity, they have got large liabilities, and their portfolio simply isn’t giving them adequate returns because too much it is tied up in the reverse repo window," he said.

Earlier in the day, speaking to CNBC-TV18, Axis Bank's former Deputy MD V Srinivasan said that banks were getting deposits despite interest rates being very low. But banks' options for deploying those funds were limited, because of the uncertain business environment.

Sen said that banks should be allowed a one-time restructuring of loans, because many businesses were likely to be in pain for longer than expected.

"Moratorium was something that was given on the discretion of the banks and different banks have given moratorium at different levels; some have given very high percentage of their outstanding moratorium, others have not, and so a lot of the wielding out that had to be or could be done has already happened.

Restructuring is a recognition that the pain faced by the borrower is going to be extended quite significantly. So, what you are doing is trying to tailor-make his liabilities to match what you expect from his revenues. So, to my mind whatever are the standard assets that banks have at the moment, I think the restructuring should be done across the board. If you are going to allow banks to pick and choose at this stage, they may actually make egregious process," he said.