**BPs – Basis Points**

1 basis point equals 1/100th of 1%, i.e. 0.01%, 10 basis points equals 0.1% and 100 basis points equals 1%. So, if we say that RBI has reduced the repo rate by 25 basis points, this means – earlier, if the repo rate was 6.75% – it has been reduced by 0.25%. So, the new repo rate will be 6.5%.

BPs usually affects the interest rates and fixed income products like Fixed Deposits (FD) and Bonds. So, if the bond yield has been increased by 50 basis points, it means that the interest rate on the bond has been increased by 0.5%. Similarly, if the bank has increased the interest rates on FD by 50 basis points, the interest rates has been increased by 0.5%.

Reduction of the repo rate by some basis points leads to the reduction of EMI for all types of loans where you took the loan on ‘floating interest rates’. It includes: Home loan, Car loan, Education loan etc.

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