The Reserve Bank of India (RBI) has rolled out a fresh set of regulatory changes, aiming to give banks more flexibility while offering additional benefits to borrowers. Out of these, three amendments will come into effect from October 1, while four others have been presented as draft guidelines open for public feedback until October 20.
Key Amendments Effective from October 1
The RBI has introduced three immediate changes impacting lending practices:
- Floating vs Fixed Interest Options
Banks now have greater flexibility in adjusting spreads on floating-rate loans, which means borrowers can enjoy the benefits of reduced interest rates sooner than before. Additionally, lenders may offer customers the choice to switch their loans from floating rates to fixed rates during interest reset periods, covering personal, retail, and MSME loans. - Loans Against Gold and Silver
Borrowers using gold as raw material in manufacturing or processing can now access a wider range of working capital loans. Tier 3 and Tier 4 Urban Co-operative Banks have also been authorized to provide such lending facilities, bringing them in line with scheduled commercial banks. - Basel III Capital Rules
Revisions to rules regarding Perpetual Debt Instruments (PDIs) will help banks strengthen their capital base. By relaxing eligible limits for foreign currency and rupee-denominated PDIs issued overseas, banks gain new opportunities to raise funds from international markets.
Draft Proposals Open for Feedback
In addition to the above, the RBI has placed four draft measures in the public domain for consultation. These proposals include:
- Gold Metal Loans (GML)
Banks may soon be allowed to extend repayment periods of up to 270 days and provide loans to domestic entities that outsource jewellery manufacturing. - Large Exposures Framework (LEF) & Intra-Group Exposures (ITE)
Specific changes have been suggested to clarify how foreign banks operating in India manage their exposure limits, risk computation, and capital-linked thresholds. - Enhanced Credit Reporting
Credit institutions could move toward weekly reporting to Credit Information Companies, ensuring faster updates. This would support accurate borrower information, quicker error rectifications, and integration with CKYC databases.
Through these changes, the RBI aims to strengthen operational flexibility for banks while ensuring borrowers receive timely access to credit and more transparent lending terms. By making credit information updates more frequent, the financial ecosystem is also expected to become more reliable and efficient.
