New Delhi, Oct. 7 -- On 7 October, the Reserve Bank of India announced a 25-basis-point repo rate hike. It can affect loans, deposits and household budgets. Here is what such an increase means for you.

The repo rate is the interest the RBI charges banks for short-term borrowing. Banks approach the RBI when they need funds for daily operations or to meet customer demands.

One basis point equals 0.01 percentage point. Therefore, 25 basis points means an increase of 0.25 percentage points.

RBI raises rates to help control inflation, which means prices are rising. Higher borrowing costs discourage new loans and reduce spending. Lower demand can help slow price increases.

Banks pay more when borrowing from the RBI. They may pass these high...