On 26th July, RBI raised repo rate and reverse repo rate by 50 BPS hence new rates will be 8% and 7% respectively. In the last 16 Months RBI increased rate 11 times.

RBI has increased rates to fight with inflation.Increase in rates will affect life of lay men on all sides. Cost of living would be so high. Few days back there was hiked in milk price by 2 rupees. Crude prices are also increasing which will increase cost of transportation. Increase cost of transportation will increase price of basic commodity. 

Worldwide effect of slow economy is also one of the reasons of increase in rates. Growth of Indian economy is also depending on agriculture. But if we will not get good monsoon this year then price of vegetables and oils will increase.

Due to increase in rates, home loans and personal loans will be costlier. Interest burden will be increased on persons who have already taken home loan on floating rates. Hence it will make miserable life for lay men. It will become dreams who wants to buy home. 

On May 3rd, 2011 Reserve Bank of India increased repo rate (rate at which RBI provide short term borrowing to banks) and reverse repo rate (rate at which bank invest fund for short term purpose with RBI) by 50 basis points (1 basis point = 0.01%). And also increase saving bank interest rate from 3.5% to 4% p.a.

Hikes in the rates will affect cost of borrowing of home loan and auto loan.

Generally, auto loans are having fixed interest rate hence it will not affect to existing customer but for fresh customer, auto loan will be costlier.

In case of home loan, floating rate will change due change in rate by RBI.
Home loan will be costlier by 0.50%.

RBI has taken this step to control inflation.

Good news is that RBI hiked the saving interest rate from 3.5 % to 4% which will increase interest revenue who are parking more fund in saving accounts.