Money talk can be tricky. Even small changes in loan rates or stock prices matter a lot. To measure these small changes, people use Basis Points (BPS). If you want to understand how banks, loans, and stocks work, you should know about BPS.

What is a Basis Point?

A Basis Point is a tiny unit used to show changes in percentage. It helps to keep things simple.

• 1 BPS = 0.01%

• 100 BPS = 1%

Instead of saying "interest rates went up by 0.50%", people say "it increased by 50 BPS". This makes things clearer.

Where is Basis Point Used?

• Loans – Banks use BPS to show changes in interest rates.

• Bonds – Tiny changes in bond returns are measured in BPS.

• Stock Market – Some stock price changes are also shown in BPS.

Examples of Basis Points

• Loan Interest Change
  If a bank increases loan interest from 5% to 5.25%, that is a 25 BPS increase.

• Bond Return Change
  If bond returns move from 3.5% to 3.6%, that is a 10 BPS increase.

• Stock Market Movement
  If a stock indexmoves from 1000 to 1010, that is a 100 BPS (1%) increase.

Why is Basis Point Important?

• Avoids Confusion – Instead of saying “small percentage change”, we use BPS for clarity.

• Helps in Investing – Even a small BPS change can affect stocks, bonds, and loans.

• Used by Banks & Markets – RBI, banks, and investors use BPS to explain financial changes.

How to Calculate Basis Points?

It is simple:

• 1 BPS = 0.01%

• Multiply the percentage by 100 to get BPS.

Examples:

• Change from 5% to 5.5% = 0.5% = 50 BPS

• Change from 3.2% to 3.3% = 0.1% = 10 BPS

Basis Points vs Percentage Points

How Does Basis Point Affect You?

• Loans – Higher BPS means higher loan rates (costlier for borrowers) but higher savings rates (good for savers).

• Stock Market – A small BPS change can affect stock prices.

• Bonds – Even a tiny BPS change changes bond returns.

Who Uses Basis Points?

• Banks – RBI and other banks adjust rates using BPS.

• Stock Market Experts – Investors track BPS to understand market moves.

• Finance Analysts – They explain loan and investment changes using BPS.

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Final Words

Basis Points (BPS) help explain small money changes. Whether it’s about loans, stocks, or bonds, knowing BPS makes financial news easy to understand.

If you take loans or invest, keep an eye on BPS! Even small changes can affect your money.

Related Blogs- Importance of BPS | Beginners guide to Bonds | Bond Investment Strategies | Stock Market Instruments