RBI draft rules may change small-loan pricing and NBFC products

The Reserve Bank of India has proposed two draft rules that could reshape how fintech firms and non-banking financial companies offer small loans. The first, released on 12 August, requires lenders to set a board-approved annual percentage rate ceiling for microfinance and personal loans up to Rs 50,000. The second, issued on 6 August, would restrict NBFCs to offering only term loans, effectively barring revolving credit lines that allow repeated drawals without fresh underwriting.

Livemint reports that the pricing proposal follows complaints about opaque charges and high APRs, citing a Mint investigation that found loans with APRs exceeding 600%. Experts quoted by the outlet say lenders may need more sophisticated risk-assessment systems. Times Now reports that the draft directions, which are open for comment until 11 September, would take effect from 1 April 2027 if finalised. The outlet notes that floating-rate loans would respond faster to RBI rate moves, but that retail fixed-rate loans like personal and auto loans are not directly affected.

The term-loan rule, if implemented, could hit pay-later and flexi-loan products used by e-commerce platforms such as Flipkart and Amazon. Livemint reports that fintech NBFCs may need to underwrite each draw fresh, raising costs and slowing borrowing.