The increase puts rates at their highest for nearly a decade.
The repo rates are also hiked to contain inflation in the country. On the first day of the three-day meeting of RBI's Monetary Policy Committee, State Bank of India had raised its long-term deposit rates, albeit marginally. Additionally, CPI inflation was also pushed above its 2% target to 2.4% in June.
She added: "However, rates still have a long way to climb, as back in February 2009 - the last time base rate stood above 0.50% - the average easy access account paid 1.19%, whereas now it pays just 0.53%".
While savers may be hoping for better returns, Bank of England statistics show that the average interest rate on United Kingdom current accounts increased by only 0.09% in the seven months since rates were increased by 0.25% previous year.
Mr Brown believes if it does raise rates again on Thursday, it will be the only increase in 2018. Investors looking for risk-free, guaranteed returns may continue to invest in PPF, NSC, Sukanya Samriddhi, Post Office Savings, etc. Impact on 10-year G-sec yieldThe maintenance of the neutral stance cooled bond yields after the policy announcement, as the rate hike itself was already priced in.
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Following the decision, BBC News website readers submitted questions about how the Bank rate rise might affect them.
'We will be reviewing other variable rate mortgages, including our standard variable rate, following this decision, and we will communicate to those customers impacted, with notice given in line with their mortgage terms and conditions'.
No. None of these fixed-rate deals will see an immediate rise.
The Bank of England indicates that although interest rates are now on the rise, they are highly unlikely to hit pre-crisis levels of above 5% for the foreseeable future.
Where will rates go from here?
Economists polled by Reuters had mostly expected a 7-2 vote in favour of raising rates.
Investec predicts a quarter-point rise every six months until rates reach 1.5% in 2020.
Lloyds Banking Group (includes Halifax) - All products that track the Bank of England base rate will be increased by 0.25 per cent from September.
But output is still fairly meek and survey figures on Wednesday signalled a weaker performance from the manufacturing sector in July, suggesting that growth is being held back amid global trade disruptions and uncertainty over Brexit.
"Developments regarding withdrawal from the European Union remain the most significant influence on the economic outlook".
The pound extended losses on Thursday after the Bank of England raised interest rates from crisis era lows but was cautious about any further tightening with an uncertain Brexit on the horizon.