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India's Central Bank Cuts Key Interest Rate By 25 Basis Points

Pal Pillai|AFP|Getty Images

India's central bank on Tuesday cut its benchmark policy rate by 25 basis points for the second time since the start of the year in a bid to help revive flagging growth in Asia's third-largest economy, but warned that its scope for further policy easing is limited.

In its mid-quarter policy review, the Reserve Bank of India lowered its policy repo rate to 7.50 percent and left the cash reserve ratio for banks unchanged, in line with expectations.

India's economy is on track to grow at its slowest in a decade at around 5 percent in the fiscal year ending this month, and is expected to see modest improvement in the following year.

However, a recent uptick in headline wholesale inflation, rising food price-driven consumer inflation and a record-high current account deficit limit the RBI's space for more aggressive monetary easing.

(Read More: Expect a Far More Dovish India Central Bank)

"Even as the policy stance emphasis addressing the growth risks, the headline for further monetary easing remains quite limited," the RBI said in its statement.

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