The Reserve Bank of India raised its repo rate by 25 basis points to 5.5 percent on October 7. It is the first hike in nearly four years, and the central bank’s stance has shifted to ‘calibrated tightening’. But what does it mean for you?

The repo rate is the rate at which the RBI lends money to banks. When it rises, banks usually raise the interest they charge on loans. Home loan, car loan and personal loan EMIs are likely to go up in the coming months.

Borrowers with floating-rate loans will feel the change first. A higher EMI means you pay more each month for the same loan amount. New borrowers will also face higher rates.

There is a silver lining for savers. Banks often raise fixed deposit rates after a repo hike, so your savings can earn more.

The RBI acted because inflation is running hot. Consumer inflation hit 4.82 percent in August, above the 4 percent target for the third month in a row. The bank wants to keep prices in check while growth stays strong at 7.8 percent.