As widely speculated, the Reserve Bank of India (RBI) has hiked the repo rate for the sixth time in a row, by 25 bps to 6.50% with immediate effect.

The monetary policy committee (MPC), comprising three members from the central bank and three external members, raised the key lending rate or the repo rate (INREPO=ECI) to 6.50%, by voting 4 out of 6 in favour of the move.

"The stickiness of core or underlying inflation is a matter of concern. We need to see a decisive moderation in inflation. We have to remain unwavering in our commitment to bring down inflation," RBI Governor Shaktikanta Das said, while announcing the committee's decision.

Das said that the inflation-adjusted, real interest rate remains below pre-pandemic levels and liquidity remains surplus, even though it is lower than during the pandemic.

After the RBI's latest repo rate hike today, banks are expected to raise interest rate in retail loans. So, it's of utmost importance for a common man to know how this repo rate hike decision by the Reserve Bank of India (RBI) is going to impact one's monthly EMI.

As the banks will now have to pay a higher amount of interest to the RBI which in turn shall be collected from the retail/ corporate borrowers of the banks. This would result in higher interest outflow on loans taken from the banks. Thus the loans in general will become costlier by 1-2%.

By how much exactly banks pass on the benefit of the February policy rate hike on their FDs should be keenly observed.