The Reserve Bank of India on Friday lowered its key rates by a quarter point for the third time this year to revive flagging economic growth. But the unchanged cash reserve ratio as well as hints that there is limited scope for further rate manoeuvre disappointed the markets.

The central bank, led by Governor Duvvuri Subbarao, cut its repo rate to 7.25 percent from 7.50 percent and adjusted the reverse repo rate to 6.25 percent from 6.50 percent.

The repo rate is the rate at which the central bank lends to banks and the reverse repo rate is the rate at which it accepts deposits from banks. The latest move was in line with economists' expectations.

Capital Economics India Economist Aninda Mitra expects no more than one additional 25 basis point cut in the second half of this year, and possibly another 25 basis point cut in the first quarter of 2014.

In the Annual Policy for 2013-14, the RBI said the stance of monetary policy is intended to address accentuated risks to growth, guard against the risks of inflation pressures re-emerging and to appropriately manage liquidity.

The RBI maintained its cash reserve ratio, or CRR, at 4.00 percent. The bank last slashed the key rates and CRR by 25 basis points in January.

Huge current account deficit and high inflation are risks that limit the room for further easing, the bank said. The monetary policy will have to remain alert to the risks on account of the current account deficit and its financing, which could warrant a swift reversal of the policy stance, it added.

The bank projects baseline GDP growth for 2013-14 at 5.7 percent compared with the 5.5 percent growth estimated for the previous fiscal year.

At the same time, wholesale price inflation is expected to be range-bound around 5.5 percent during 2013-14. The bank sees significant upside risks to inflation in the short term.

The bank said it will "endeavour to condition the evolution of inflation to a level of 5 percent by March 2014, using all instruments at its command."

"Overall, the balance of risks stemming from the Reserve Bank's assessment of the growth-inflation dynamic yields little space for further monetary easing," it said.

Subbarao said monetary policy alone cannot revive growth. For growth to rebound, there should be a genuine attempt to resolve supply bottlenecks and improve governance and stepping public investment, the RBI Chief said.

Deposit growth is projected to grow 14 percent and M3 growth is pegged at 13 percent for 2013-14.

Today, the RBI said proportion of certain bond holdings of banks should not exceed 23 percent. Currently, the banks are permitted to hold the held-to-maturity category securities up to 25 percent. The HTM limit will bring it on par with the 23 percent statutory liquidity ratio.

This would be effected by way of reduction of at least 50 basis points every quarter, beginning with the quarter ending June 2013.

Further, the RBI asked banks not to lend against the security of gold coins above 50 grams per customer, citing the fall in gold prices.

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