1 week ago

RBI's Reset of Loan and Deposit Interest Rate Norms

The Reserve Bank of India wants banks and other lenders to use clearer and more consistent rules when setting loan interest rates.

This should make it easier for people to compare loans from different lenders.

Floating loan rates would be checked at least once every three months.

That means borrowers may see rate cuts or increases more quickly.

Lenders would have to explain the extra margin, or spread, added to a benchmark rate.

They generally could not raise this spread for three years, except when a borrower's credit risk changes.

The RBI also wants banks to show deposit rates more consistently.

These changes are meant to make borrowing and saving more transparent, although lenders can still offer different rates.

Key facts

Loan pricing: Fixed and floating-rate loans would be linked to an internal or external benchmark plus a spread.
Rate reset: Floating-rate loans must be reset at least once every three months.
Interest calculation: Interest would generally be charged on monthly rests and calculated using a daily reducing balance.
Spread changes: Credit risk premiums may change when a borrower's credit profile changes; other spread components generally cannot rise for three years.
Loan migration: Existing benchmark-linked loans would move to the new framework by April 2029 without an increase in borrower interest rates.
Deposit rates: Fixed-deposit rates must be standardised across all branches and customers from October 1.
Bulk deposits: Rates for single rupee term deposits of Rs 3 crore or more must be published on bank websites by 10 a.m. each business day, with a grace period until 10:10 a.m.

financialexpress.com · 1 week ago