The Reserve Bank of India is set to introduce new draft rules that aim to make loan pricing more consistent and transparent, potentially reducing disparities for existing and new borrowers and improving fairness in lending practices.
India’s central bank is moving to tighten how lenders price loans, a step that could reduce the gap between offers made to new customers and those given to existing borrowers. According to draft rules from the Reserve Bank of India, banks would face stricter expectations on how they set and revise loan spreads, while borrowers could gain more visibility into the benchmark, spread components and pricing method behind their loans.
The proposal does not outlaw different rates for new and existing customers, but it is designed to curb the kind of discounting that has often favoured fresh business. Business Standard reported in 2015 that the RBI had already pushed banks to keep pricing more consistent across borrower groups, after concerns that long-standing customers were being left on steeper rates while new borrowers received sharper deals. The new draft appears aimed at reinforcing that principle with more detailed disclosure and tighter discipline.
The move also fits into a broader pattern of the RBI trying to make lending terms clearer and fairer. In 2024, the central bank revised fair-lending rules to stop penal charges from being used as a source of revenue, and in 2025 it proposed removing foreclosure charges on floating-rate loans for retail and MSME borrowers, as well as loans taken by individuals for business purposes. Those steps were meant to make it easier for borrowers to repay early or switch lenders without being penalised.
Under the latest draft, floating-rate benchmark resets would be limited to every three months, and floating-rate personal and MSME loans at banks would have to be linked to external benchmarks. The changes reflect a long shift in Indian lending rules that began when the RBI moved away from the old benchmark prime lending rate system in 2009 in favour of a base rate framework designed to improve transparency and better reflect policy rate changes. If adopted, the new norms would further narrow the scope for pricing discretion and could make loan costs more predictable for consumers and small businesses.
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