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Informist, Wednesday, Aug. 12, 2026

--RBI issues draft circular harmonising lending norms across regulated cos 

--RBI seeks comments on draft norms on loan interest rates by Sept 11 

MUMBAI – The Reserve Bank of India on Wednesday issued draft directions on interest rates on loans and advances across regulated entities. The central bank proposed to issue harmonised directions for all regulated entities, prescribing a broad, principles-based framework for the determination of interest rates on both fixed-rate and floating-rate loans, commensurate with the nature, complexity, and scale of the operations of such entities, it said.  

The current regulatory framework on interest rates on advances is applicable to commercial banks, small finance banks and local area banks, and includes norms for instructions on internal and external benchmark-based lending frameworks for floating-rate loans and determination of spreads over such benchmarks. However, regulatory instructions on interest rates on loans and advances extended by other regulated entities like non-banking financial companies, all India financial institutions, regional rural banks, urban cooperative banks, and rural cooperative banks, are largely with regard to conduct-related aspects, the RBI said. The central bank also observed divergent practices such as the determination of the marginal cost of funds-based lending rate and its components. Current guidelines also contain very limited regulatory instructions regarding fixed-rate loans, the regulator said in the circular. 

In the circular, the RBI has given directions on general guidelines like board-approved policy and interest rate framework, interest rate determination for fixed-rate and floating-rate loans, internal and external benchmarks, spreads and provides directions on special cases like foreign currency loans, exemptions, repeal and other provisions. RBI Governor Sanjay Malhotra had proposed these norms in his policy statement last week, "in order to enhance transparency in lending rates and strengthen consumer protection."

The regulator has sought comments from the public on the draft norms by Sept. 11.  End

Reported by Meera Nair

Edited by Avishek Dutta

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