The Reserve Bank of India (RBI) has recently made a significant move by reducing its key interest rate, commonly referred to as the repo rate, by 50 basis points. This adjustment brings the new repo rate down to 5.50 per cent. If you’re curious about what this means in practical terms and how it might impact your daily life or financial decisions, here’s a straightforward explanation to help you understand.

What is a basis point?

A basis point (bps) is just a fancy financial term. One basis point equals 0.01 per cent. So, 50 bps equals 0.50 per cent. When the RBI cuts the repo rate by 50 bps, it means it has lowered the interest rate by half a percentage point.

What Is The Repo Rate?

The repo rate is the interest rate at which the central bank lends money to the other banks. When this rate goes down, the interest rates go down, so it becomes cheaper for banks to borrow money. And when banks borrow at lower rates, they usually lower the interest rates they charge people and businesses.

What Does This Mean For You?

• Home loans, car loans, and personal loans may become cheaper. If you're repaying a loan linked to the repo rate, your EMIs could go down.


• New borrowers might get loans at better interest rates.


• Businesses may borrow more easily to expand, helping the economy grow.


• On the flip side, returns on fixed deposits (FDs) may also fall, since banks earn less and may pass on lower interest to depositors.

A 50 bps cut is considered quite significant, it's not just a small tweak. It shows that the RBI is serious about boosting growth and making borrowing more affordable, especially when inflation is under control.