New Delhi, Nov 29 (IANS): Ahead of the Reserve Bank of India's fifth bi-monthly policy review for this fiscal next week, industry chamber CII on Sunday said the country's overall financial conditions have shown a healthy improvement, thanks to low cost of funds, strong liquidity, better external financial linkages and uptick in economic activity.

"The CII-IBA Financial Conditions Index at 70.3 for Q3 FY 2015-16 shows healthy improvement in the overall financial conditions in the Indian economy vis-a-vis the previous quarter," the Confederation of Indian Industry (CII) said, citing its latest survey.

The index is based on a survey of major banks and financial institutions on their expectations of key financial and economic variables determining financial conditions of the Indian economy.

A majority of respondent banks and financial institutions surveyed reported improvement or no change in overall financial conditions as against a deterioration over the previous quarter.

"It is heartening to note that financial conditions of the Indian economy are improving in tandem with the overall macro-economic outlook," said CII director general Chandrajit Banerjee.

"The scale of improvement in the financial conditions index for the current quarter will provide necessary comfort to RBI in continuing and further extending the accommodative monetary policy stance for supporting higher economic growth," he said.

A total of 36 leading banks, including 21 state-run ones, and financial institutions took part in the survey.

"The directional change in the performance of the financial conditions index augurs well for the Indian economy," Indian Banks' Association and Dena Bank chairman Ashwini Kumar said in the statement.

"With RBI reducing the repo rate by 50 basis points just before the beginning of the current quarter, a majority of respondent banks and financial institutions expect the overall cost of funds to decline in the current quarter," he added.