India's second largest lender ICICI Bank [Get Quote] played its cards close to the chest on lending rate cuts and said it would assess the liquidity conditions in the next few days before taking a call.

"Interest rates won't go down in isolation. Funding costs should come down before we can think of reducing interest rates... With the steps (taken by the RBI and the government), the interest rates will clearly start declining...We have a few days to watch our liquidity situation (before deciding on a rate cut)," ICICI's MD and CEO K V Kamath told reporters in Mumbai on November 5.

The financial crisis in the domestic market was not as severe as in other global markets and policy makers were always willing to take adequate measures as the situation demanded, Kamath said. "There is a readiness to interact with any bank and intervene at any time as required... The challenge in India is not as severe as what it is around the world," he said.

The banking regulator has kept a close watch on the liquidity conditions in the system on a continuous basis and might act again if conditions remain uneasy, Kamath said. "The RBI and the government have said that the liquidity situation will be monitored on a continuous basis. If further liquidity is needed or if interest rates are not coming down, further steps will be taken," Kamath said on the sidelines of a CII-organised seminar.

However, the banking system needs to wait and watch the actual impact of the recent liquidity infusion in the system and then review their rates, Kamath said. "It is too premature to say that liquidity is excess or short... I think, on a daily basis, we will have to monitor it," he said.

There was a need for the interest rates to decline in order to support economic growth, expected to grow at seven to eight per cent in the current year, Kamath said. "With inflationary pressures abating, I think even the policy makers want that (lowering of rates)," he said.

A high interest rate regime which prevailed in the recent past has resulted in a slowdown in the profitability of the corporate sector in the past few quarters, he said.

The RBI has undertaken a slew of measures within the last month to infuse liquidity and push up growth momentum through substantial reductions in Cash Reserve Ratio, repo rate and Statutory Liquidity Ratio, besides opening special borrowing windows for banks.