The repo rate is the rate at which the RBI lends to banks. When it rises, banks pay more to borrow, and they usually pass the cost to customers through higher loan rates.

The RBI raised the repo rate by 25 basis points to 5.50 per cent, its first hike in nearly four years. The central bank cited persistent inflation and growth beating estimates.

For borrowers, the impact is direct. Home, auto and personal loan EMIs linked to external benchmarks will rise. A 25 basis point hike on a Rs 50 lakh home loan can add a few hundred rupees to the monthly EMI.

Savers may benefit. Banks often raise fixed-deposit rates after a policy hike, though usually with a lag.

Goldman Sachs expects another 25 basis point hike in December. Borrowers planning big loans may want to lock in rates sooner rather than later.

The RBI shifted to what it calls calibrated tightening, hinting at potential future increases. That language matters for markets pricing in the next move.

For businesses, higher rates raise the cost of working capital. But with growth beating estimates, the central bank judged the economy can absorb the hike.