The Reserve Bank of India has raised the repo rate to 5.5 percent. Here is what the decision means for your money in simple terms.

The repo rate is the interest rate at which the RBI lends money to banks. When it goes up, banks usually raise the interest they charge on home loans, car loans and personal loans.

This is the first hike in nearly four years. The rate had stayed at 5.25 percent since early 2026. A 25 basis point hike means a quarter of a percent increase.

If you have a floating-rate home loan, your EMI may go up slightly. Banks do not always pass on the full hike at once. They may also choose to extend your loan tenure instead of raising the EMI.

Why did the RBI act? Inflation is rising. Prices of fuel and food have gone up, partly because of the Iran war and a weak monsoon. Consumer inflation touched 4.82 percent in August, above the RBI's 4 percent target.

The central bank also changed its stance to "calibrated tightening". This means it is now more focused on controlling prices than on boosting growth.