Amid a string of interest rate cuts by state-run banks since April 1, country's biggest private lender ICICI Bank [Get Quote] today said chances of it reducing rates are less unless government bond yields come down.

The bank has passed the interest rate benefit to consumers as far was possible and there is no indication of any further cut unless the government (bond) rates eased, ICICI Bank Managing Director and CEO K V Kamath said.

"The rate of government borrowing is 7 per cent when bankers were expecting below 5 per cent on a 10-year (government) paper," Kamath added.

Lending rates cannot be low if bond yields are high because banks will prefer parking their money in safe government bonds to lending out which carries risk.

"We may want more rate cut though rates have corrected by 3-4 per cent," he said pointing at government borrowing rates.

Thirteen PSU banks have already cut their lending rates by up to 0.50 percentage points this fiscal. Foreign lender Citibank has also reduced interest rates by 0.50 percentage points.

Two days ago Cabinet secretary K M Chandrasekhar had asked public sector banks to examine the possibility of reducing interest rates.

Canara Bank [Get Quote], Allahabad Bank [Get Quote] and other PSU lenders have cut their prime lending rates in the range of 25-50 basis points.

Kamath said he hoped the economy would expand by seven to eight per cent in 2009-10.

He said in a year's time predicting 10 per cent growth was reasonable thinking.

Credit in the corporate sector has picked up as rural India was doing well and several sectors like FMCG, steel and cement were also doing well.

"Project financing could also begin to pick up as in the last two quarters there was demand for working capital," Kamath said.

However, certain sectors remained stressed like real estate and oil and gas, he added.

He was speaking at the annual convocation of the Indian Institute of Management, Calcutta.