GeneralFinancial Glossary
Basis Points (bps)
Definition
One basis point equals 0.01 percentage points (1/100th of a percent). So 50 basis points equals 0.50%. Financial professionals use basis points to express small changes in interest rates, yields, or expense ratios to avoid ambiguity.
Why It Matters
A 25 bps change in your home loan rate may sound trivial, but on a Rs 75 lakh loan over 20 years, it changes your total interest outgo by roughly Rs 3 lakh. In mutual funds, the difference between a 0.5% and 1.5% expense ratio compounds significantly over decades.