Now Reading: RBI proposes new loan pricing rules for banks, NBFCs
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RBI proposes new loan pricing rules for banks, NBFCs
The Reserve Bank of India (RBI) has issued draft rules to bring more transparency and consistency to how lenders set interest rates on loans. The proposed framework covers fixed and floating-rate loans…
The Story in Brief
The Reserve Bank of India (RBI) has issued draft rules to bring more transparency and consistency to how lenders set interest rates on loans. The proposed framework covers fixed and floating-rate loans for commercial banks, regional rural banks, cooperative banks, NBFCs and housing finance companies. It suggests that lenders must base rates on internal or external benchmarks plus a risk-based spread, and cannot price a loan below that benchmark.
For floating-rate personal and MSME loans, commercial banks must link them to an external benchmark. The RBI also standardises MCLR calculation using a three-month average cost of fresh deposits. Existing loans must be migrated to the new framework by April 1, 2029. The rules are open for feedback and are expected to take effect from April 1, 2027.
The Indian Opinion
The RBI is tightening the screws on loan pricing opacity, but the fine print matters. The draft says lenders cannot increase spread arbitrarily, yet leaves room for risk-based components like credit risk premium. Borrowers need to watch whether banks use this to jack up rates on existing loans. The real test: when the rules kick in 2027, will home loan borrowers see clearer reset terms or just new loopholes? The draft demands borrower consent for benchmark changes, a point that will decide if transparency is real or cosmetic.
Sources (2): ndtvprofit.com, economictimes.indiatimes.com
This story was synthesised by AI from the 2 sources linked above.
Updated: this story now draws on 2 sources.
