Now Reading: RBI proposes tighter loan pricing rules from April 2027
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RBI proposes tighter loan pricing rules from April 2027
The Reserve Bank of India has proposed tighter rules for setting and revising loan interest rates, with the framework scheduled to take effect on April 1, 2027. Banks would calculate MCLR using…
The Story in Brief
The Reserve Bank of India has proposed tighter rules for setting and revising loan interest rates, with the framework scheduled to take effect on April 1, 2027. Banks would calculate MCLR using a three-month moving average of the cost of new domestic deposits and borrowings. The data would be system-generated and independently verifiable. The draft also requires lenders to document their spread-setting methods and disclose benchmarks, spread components and pricing methodology.
The proposal would not ban different rates for new and existing borrowers, but could limit repeated changes to lender-controlled spreads. Credit-risk premiums could change when a borrower’s credit profile changes, while other spread components could not be revised for three years. Floating-rate personal and MSME loans at banks would have to use external benchmarks. Existing loans would be migrated to the new framework by April 1, 2029, through a one-time mapping exercise.
The Indian Opinion
The easy claim that the RBI is ending preferential pricing for new borrowers is wrong. The draft still permits different rates, but seeks to make the reasons and changes traceable. That could help customers compare loans, though a formula alone will not ensure cheaper credit if funding costs rise. The useful test is whether lenders publish clear spread histories and whether MCLR-linked borrowers see resets within three months.
Sources (2): bfsi.economictimes.indiatimes.com, businesstoday.in
This story was synthesised by AI from the 2 sources linked above.
Updated: this story now draws on 2 sources.
