Repo rate is the rate at which the RBI lends short-term funds to commercial banks.
The RBI's repo rate has been kept unchanged at 4 percent since May 2020.
In a surprise move on Wednesday, monetary policy committee of RBI increased the repo rate by 40 basis points (bps).
One basis point is one-hundredth of a percentage point.
Now, the current repo rate is 4.40 percent after raising 40 basis points (bps).
RBI also hiked the cash reserve ratio (CRR) by 50 basis points.
The increase in repo rate will push banks and NBFCs to hike lending and deposit rates.
The interest rate on the loan will go up due to increase in the cost of funds of the bank.
Equated monthly installments (EMIs) on home, vehicle, and other personal and corporate loans are likely to rise.
People might have to pay a slightly higher interest rate if they take out a home loan.