Subbarao too had expressed concern over spiralling food prices, but said it was not the right time for the bank to intervene.

'Yes, the agricultural situation is disturbing and there will be pressure on food prices. We are sensitive and mindful of the drought's impact on inflation and will take appropriate steps,' he said on the sidelines of a RBI function in Hyderabad Aug 14.

Last week, Prime Minister Manmohan Singh said the government would do 'everything possible' to put the lid on food prices inflation. The government has already asked the states to act against hoarders to check rising prices.

While speaking at the chief ministers' conference here Monday, he reiterated that there was no need to panic over the drought situation.

The prime minister said the government has 'a better understanding of how to handle a crisis like this'.

The government has already constituted an Empowered Group of Ministers (EGoM) to look into the drought issue.