The Reserve Bank of India cut its benchmark repo rate by 25 basis points to 5.5% on Wednesday. The Monetary Policy Committee voted 4-2 in favour of the reduction.

The central bank raised its GDP growth forecast for the current fiscal year to 7% from 6.8%. It also lowered its inflation projection sharply. Consumer price inflation is now expected at 2% for the year, down from 2.6%.

The policy stance was kept at neutral. That means the committee will watch incoming data before deciding its next move.

Lower policy rates usually push banks to trim lending rates. Borrowers with floating-rate home and car loans may see some relief in the coming months.

The decision comes as inflation has cooled across food and core categories. Growth, meanwhile, has stayed firm despite global headwinds. The committee said it would remain data-dependent while supporting the recovery.

Bond markets cheered the move, with yields softening on the announcement. Analysts said the RBI is using the room created by low inflation to support demand. With the stance kept neutral, economists expect the committee to pause and assess data over the next two reviews. The vote split of 4-2 shows the decision was debated.