RBI Proposes New Loan Interest Rate Framework: Key Rules For NBFCs And Borrowers

The
Rese ve
Ba k
of
I dia
(RBI)
has
p oposed
a
commo
f amewo k
fo
how
egulated
e tities
dete mi e
i te est
ates
o
loa s,
i cludi g
p ovisio s
aimed
at
p otecti g
bo owe s
taki g
small-value
a d
sho t-te m
ag icultu al
loa s.

A
key
p oposal
is
that
NBFCs
would
ot
be
equi ed
to
li k
floati g- ate
loa s
to
a
exte al
be chma k.
The
equi eme t
would
co ti ue
fo
floati g- ate
etail
loa s
a d
floati g- ate
loa s
to
mic o,
small
a d
medium
e te p ises
(MSMEs)
offe ed
by
comme cial
ba ks.

The
p oposals
a e
pa t
of
d aft
di ectio s
that
seek
to
b i g
le di g- ate
p actices
ac oss
egulated
e tities
u de
a
b oad,
p i ciples-based
f amewo k.

RBI
P oposes
P otectio
Fo
Small
Bo owe s

The
d aft
di ects
all
egulated
e tities
to
e su e
that
i te est
ates
cha ged
o
loa s
of
up
to
Rs
50,000
a e
ot
usu ious.
It
also
p oposes
that
le de s
explicitly
set
a
ceili g
o
the
a ual
pe ce tage
ate
(APR),
i cludi g
i te est
a d
all
othe
cha ges
a d
fees,
fo
mic ofi a ce
a d
small-value
loa s.

Fo
sho t-te m
ag icultu al
loa s
give
to
small
a d
ma gi al
fa me s,
the
RBI
has
p oposed
that
the
combi ed
i te est,
cha ges
a d
fees
should
ot
exceed
the
p i cipal
amou t.
A
sho t-te m
loa
has
bee
defi ed
as
o e
with
a
o igi al
te o
of
up
to
o e
yea .

The
RBI
said
its
le di g- ate
f amewo k
is
i te ded
to
suppo t
effective
mo eta y
policy
t a smissio ,
app op iate
p ici g
of
c edit
isk
a d
fai
a d
o -disc imi ato y
t eatme t
of
bo owe s,
epo ted
Busi ess
Sta da d.

Exte al
Be chma k
Not
Ma dato y
Fo
NBFCs

U de
the
p oposed
f amewo k,
comme cial
ba ks
would
co ti ue
to
li k
floati g- ate
etail
loa s
a d
floati g- ate
MSME
loa s
to
a
exte al
be chma k.

NBFCs,
all-I dia
fi a cial
i stitutio s,
egio al
u al
ba ks
a d
coope ative
ba ks,
howeve ,
would
have
the
disc etio
to
decide
whethe
to
offe
exte al
be chma k-li ked
floati g- ate
loa s.

These
e tities
“may,
at
thei
disc etio ,
choose
to
offe
exte al
be chma k
li ked
floati g
ate
loa s
to
a y
catego y
of
bo owe s,& dquo;
the
RBI
said.

The
ce t al
ba k
said
existi g
le di g- ate
egulatio s
a e
la gely
detailed
fo
comme cial
ba ks,
while
ules
applicable
to
othe
egulated
e tities,
i cludi g
NBFCs,
mai ly
cove
co duct- elated
aspects.

The
RBI
also
said
it
had
obse ved
“dive ge t
p actices& dquo;
amo g
comme cial
ba ks
i
a eas
i cludi g
the
dete mi atio
of
the
ma gi al
cost
of
fu ds-based
le di g
ate
(MCLR)
a d
its
compo e ts.

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How
I te est
Rates
Would
Be
Dete mi ed

The
p oposed
f amewo k
would
cove
both
fixed-
a d
floati g- ate
loa s.
I te est
ates
would
be
dete mi ed
usi g
a
i te al
o
exte al
be chma k
alo g
with
a
isk-based
sp ead.

Le de s
would
ot
be
allowed
to
p ice
a
loa
below
the
applicable
be chma k.

Fo
floati g- ate
loa s,
the
be chma k,
eset
pe iodicity
a d
eset
date
would
have
to
be
specified
i
the
loa
ag eeme t.
The
be chma k
would
ge e ally
have
to
be
eset
at
i te vals
of
o
mo e
tha
th ee
mo ths.

This
equi eme t
would
ot
be
ma dato y
fo
NBFCs
i
the
Base
Laye
a d
ce tai
smalle
coope ative
ba ks.

The
p oposed
f amewo k
would
also
equi e
le de s
to
have
a
boa d-app oved
policy
fo
dete mi i g
the
sp ead
ove
the
be chma k.
The
sp ead
could
i clude
a
c edit
isk
p emium
(CRP),
ope ati g
cost,
te m
p emium
a d
busi ess
st ategy
p emium.

The
CRP
could
be
evised
o ly
whe
the
bo owe & squo;s
c edit
p ofile
cha ges
a d
followi g
a
comp ehe sive
eview.
Othe
compo e ts
would
ge e ally
ot
be
allowed
to
cha ge
befo e
th ee
yea s
fo
a
floati g- ate
loa .

Le de s
could
educe
these
compo e ts
ea lie
fo
custome
ete tio ,
p ovided
the
move
is
based
o
justifiable
a d
o -disc imi ato y
g ou ds.
These
est ictio s
would
ot
be
ma dato y
fo
Base
Laye
NBFCs
a d
ce tai
smalle
coope ative
ba ks.

Rules
Fo
Fixed-Rate
Loa s
A d
Be chma k
Disco ti uatio

The
d aft
also
b i gs
fixed- ate
loa s
explicitly
withi
the
p oposed
f amewo k.
Such
loa s
would
be
p iced
usi g
a
i te al
o
exte al
be chma k
plus
a
isk-based
sp ead
a d
could
ot
be
p iced
below
the
applicable
be chma k.

If
a
loa
moves
betwee
fixed
a d
floati g
ates,
the
eleva t
p ovisio s
would
apply
du i g
the
espective
pe iods.

The
RBI
has
fu the
p oposed
that
i te est
be
calculated
o
a
daily
educi g
bala ce
basis
usi g
the
actual/actual
day-cou t
co ve tio .

If
the
be chma k
li ked
to
a
floati g- ate
loa
is
disco ti ued
du i g
its
te u e,
the
le de
would
have
to
eplace
it
without
putti g
the
bo owe
at
a
disadva tage
i
te ms
of
the
applicable
i te est
ate.

New
F amewo k
To
Be
Impleme ted
By
2029

The
RBI
has
p oposed
a
o e-time
mappi g
exe cise
to
mig ate
all
loa s
to
the
ew
f amewo k
by
Ap il
1,
2029.

Bo owe
co se t
would
be
equi ed
fo
the
mig atio ,
a d
the
t a sitio
could
ot
esult
i
a
i c ease
i
the
i te est
ate
applicable
immediately
befo e
the
cha ge.

Le de s
would
also
ot
be
allowed
to
cha ge
bo owe s
a y
fee
fo
mig ati g
thei
loa s.

The
RBI
said
the
p oposed
di ectio s
would
p ovide
a
“b oad,
p i ciples-based
f amewo k& dquo;
fo
dete mi i g
i te est
ates
ac oss
egulated
e tities
a d
eplace
the
existi g
di ectio s
applicable
to
diffe e t
catego ies
of
le de s.

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