RBI proposes new MCLR formula on 3-month moving average

Banks lend people money, and the interest they charge depends partly on what it costs the bank to get money in the first place.

In India, the central bank called the RBI makes rules to keep this fair and clear.

Right now, the RBI has suggested a new way for banks to work out that cost.

Instead of looking at just one moment, banks would look at the average cost of new deposits and borrowings over the past three months.

The RBI also wants this information to come automatically from the bank's systems so it can be checked easily.

This is part of a bigger plan to make loan pricing more transparent.

Banks would have to set floating loan rates using a benchmark plus a spread that reflects risk and costs.

The spread's risk part could never be negative, and it could only change if the borrower's credit situation changes.

The new rules would likely start in April 2027, and older loans would need to switch over by April 2029.

All of this is meant to help borrowers understand how their interest rates are set and changed.