EcoDictionary: What is basis point?

Every now and then we come across the news that the RBI increases the repo-rate (Repo is the rate at which banks borrow short-term funds from the RBI) at a certain basis point. Then the question arises, what is basis point? 

Definition of 'Basis Point - BPS'.

BPS is a unit equal to 1/100th of 1%. It is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security.

1 basis point change is equal to 0.01% change in the rate (as 1 basis point is 100th part of 1%).  1% change = 100 basis points. 

Thus, when news comes that RBI has reduced Repo rate by 25 bps, you should know that it has been reduced by 0.25%, i.e. if the earlier Repo Rate was 4.50%, the new rate will be 4.25%.  Similarly, if you read in the newspaper that bond yields of 10 year GoI Bonds  have gone up by 20 bps in last one month, it means that the yield on bonds have gone up by 0.20%.   Thus, if the a month ago, the yield on 10 year GoI Bonds was 7.90%, the current yield on bonds will be 8.10%.