RBI changes loan rules. What did the apex bank say in its circular?
&imwidth=600&imheight=450&format=webp&quality=medium "RBI changes loan rules. What did the apex bank say in its circular?")
RBI governor Sanjay Malhotra Photograph: (ANI file)
RBI new gold loan rules: The RBI circular stated that the apex bank has revised the rules under the Reserve Bank of India (Interest Rate on Advances) (Amendment Directions), 2025, for floating-rate loans.
The Reserve Bank of India (RBI), India's apex bank, has announced new rules and guidelines for lending for small business loans. With the new guidelines, the apex bank aims to provide banks with greater flexibility in adjusting the additional interest. The new directions will take effect from October 1, 2025.
What did the RBI say in its circular?
"RBI has today issued seven Directions/Circulars, proposing to amend some of the extant Directions/Circulars applicable to banks and other regulated entities," RBI said in a circular.
The RBI circular stated that the apex bank has revised the rules under the Reserve Bank of India (Interest Rate on Advances) (Amendment Directions), 2025, for floating-rate loans.
Currently, floating-rate retail and MSME loans are linked to an external benchmark, with banks permitted to set a spread. Other than the credit risk premium, these spreads could be changed only once every three years. As per the new rules, banks can now reduce spread components earlier than three years to benefit borrowers.
The bank said that earlier, gold and silver loans were only permitted for jewellers. The new rules permit borrowers who use gold as a raw material in manufacturing or industrial processing to be eligible for these loans. Tier 3 and Tier 4 Urban Co-operative Banks can also dish out these loans.
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RBI also issued draft guidelines for public feedback on gold metal loans, large exposures, intragroup transactions, and credit information reporting.
The move came a day before the Reserve Bank of India is slated to announce India's monetary policy. Experts say the bank might reduce the rates by 25 basis points because of low inflation expectations.