Highlights: RBI cuts repo rate by 25 bps, holds CRR

MUMBAI (Reuters) - The RBI cut its benchmark interest rate by 25 basis points on Friday for the third time since January, as expected, as growth slows and inflation ebbs, but said there is little room to ease monetary policy further, disappointing markets.

Following are highlights from the monetary policy statement:

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POLICY MEASURES

* Cuts repo rate by 25 basis points to 7.25 percent.

* Reverse repo rate falls to 6.25 percent.

* Cash reserve ratio unchanged at 4.00 percent.

* Marginal Standing Facility rate adjusted to 8.25 percent.

* Bank rate adjusted to 8.25 percent with immediate effect.

POLICY STANCE

* India cbank says there is little space for monetary easing.

* Says to actively manage liquidity to reinforce monetary transmission.

* Says biggest risk to economy is current account deficit.

* Says monetary policy cannot afford to lower guard against possibility of resurgence of inflationary pressures.

* Says risks from current account deficit could warrant swift reversal of policy stance.

* Says will use "all instruments" at command to condition inflation at 5 percent by March 2014.

FORECASTS

* Baseline GDP growth forecast for 2013/14 at 5.7 percent.

* Wholesale price index inflation projection during 2013/14 at around 5.5 percent.

* M3 growth projection for 2013/14 at 13 percent.

* Credit growth projection at 15 percent, deposit growth at 14 percent.

PRUDENTIAL MEASURES

* Says banks must cut hold-to-maturity bond portfolio by 50 bps every quarter starting June quarter.

* Proposes to restrict gold import on consignment basis by banks only to meet genuine need of jewellery exporters. Guidelines to be issued by May 31.

* Proposes to restrict bank loans against security of gold coins of up to 50 gram weight. Guidelines to be issued by end-May.

* Proposes to raise capital risk weight, provisioning requirement on loans to corporates in case of unhedged forex exposures. Guidelines will be issues by end-June.

* Proposes to allow foreign institutional investors to hedge currency risk with domestic exchange traded futures. Draft guidelines will be issued by end-July.

* Proposes to increase loan limit for micro and small enterprises in the services sector. Guidelines to be issues separately.

* Implementation of credit valuation adjustment risk capital charge deferred to January 1, 2014.

* Proposes to carve out a sub-sector of commercial real estate residential housing within the commercial real estate sector with appropriate norms on risk weights and provisioning. Guidelines will be issues by end-June.

* Asks banks to carry out customer due diligence as required under know-your-customer, anti-money laundering and combating financing of terrorism guidelines wherever third party products are sold as agents. Detailed guidelines will be issues by end-June.

* Asks banks to front-load opening of branches in unbanked rural centres over a three-year cycle. Guidelines will be issued by end-June.

* Asks banks to ensure pricing of loans, especially retail loans, is transparent, realistic and related to the risk perception of the borrowers.

(Compiled by Shamik Paul; Editing by Ranjit Gangadharan and Anand Basu)