The Reserve Bank of India has unveiled a draft framework aimed at standardising lending rates, reducing delays, and enhancing transparency in mortgage and loan cost adjustments, with feedback sought from stakeholders ahead of implementation.
India’s central bank has proposed a fresh set of rules to bring more consistency to how lenders set borrowing costs, in a move aimed at improving the pass-through of monetary policy and tightening oversight of loan pricing. The Reserve Bank of India said the draft framework, titled “Reserve Bank of India (Interest Rates on Loans and Advances) Directions, 2026”, would apply across regulated entities and is designed to promote fairer treatment of borrowers while keeping credit risk pricing transparent.
Under the proposal, floating-rate loans would have to reset at least every three months from April 1, 2027, a change that would reduce the lag between policy moves and lending rates. The draft also reworks the way the marginal cost of funds-based lending rate, or MCLR, is calculated, using a three-month moving average of the weighted cost of fresh deposits and fresh borrowings. In effect, the RBI is seeking to make lending rates react faster and more predictably to changes in funding costs.
The proposal builds on a long-running effort by the central bank to clean up India’s lending-rate architecture. Earlier RBI rules required banks to anchor lending rates to a base rate or other benchmark and to keep pricing transparent and non-discriminatory, while also allowing fixed and floating-rate loans subject to asset-liability management rules. Separate guidance has also pushed banks to avoid excessive or opaque charges, particularly in small-value and personal loans.
The RBI has invited comments on the draft through its Connect 2 Regulate portal or by email by September 11, 2026. Final directions will be issued separately for each category of regulated entity after the central bank examines feedback.
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