RBI to Overhaul Loan Interest Rate Rules for All Lenders

RBI plans to standardise how all lenders calculate and charge interest on loans, targeting transparency and stronger consumer protection.

Here's what happened: RBI has announced a comprehensive review of interest rate guidelines that will apply to all RBI-regulated lenders — including banks and NBFCs — on a principle-based framework.. The proposed changes aim to harmonise interest rate rules across all lenders, address operational gaps in the current MCLR and EBLR frameworks, and standardise divergent market practices around interest charging — specifically day count conventions and benchmark reset dates.. RBI has stated that draft directions incorporating these proposals will be issued shortly for public consultation; no final effective date has been announced yet.. The stated objectives include greater uniformity in loan pricing, enhanced transparency, stronger monetary policy transmission, and bolstered consumer protection — as per RBI's notice..

What you should do: If you have a floating-rate loan (home loan, personal loan, or business loan) linked to MCLR or an external benchmark rate (EBLR/repo), locate your loan agreement and note the benchmark reset date and interest calculation method stated in it — these are the two practices RBI has specifically flagged for standardisation.. Watch rbi.org.in for the upcoming draft directions — when published, you will have an opportunity to submit feedback during the public consultation window, which is your formal channel to flag any interest-charging practice your lender currently uses that has been unfair.. If you believe your lender has already been applying interest incorrectly — for example, charging interest for extra days due to an inconsistent day count convention — you can raise a complaint with your lender first, and if unresolved, escalate to the RBI Ombudsman at sachet.rbi.org.in..

This review affects all borrowers with floating-rate loans from any RBI-regulated lender — commercial banks, small finance banks, NBFCs, and co-operative banks are all in scope. Borrowers on fixed-rate loans are less directly affected, since the MCLR and EBLR framework governs floating-rate pricing. The scale of impact is significant given that the majority of home loans and many personal loans in India are on floating rates linked to these benchmarks.