On every floating-rate EMI loan, lenders must flag rate-reset impact upfront, offer a fixed-rate switch and EMI/tenor choice, and send quarterly statements. (RBI/2023-24/55, dated August 18, 2023 (updated October 1, 2025).) It applies to all scheduled commercial banks and regional rural banks. Effective: Existing and new loans by December 31, 2023.
When external benchmark rates rose, many borrowers saw their EMIs or tenors stretched silently. This circular forces transparency and choice on every EMI-based floating-rate personal loan — and 'personal loans' in RBI's statistical definition is the broad retail basket, so floating-rate LAP and similar retail advances to individuals are squarely in scope.
First, at the time of sanction, lenders must clearly tell the borrower how a change in the benchmark rate could move their EMI and/or tenor, and headroom must be assessed so the loan can absorb a reasonable rate rise. Any later increase in EMI or tenor must be communicated immediately.
Second, at the point of a rate reset, the lender may (as amended from 1 October 2025) offer the borrower the choice to switch to a fixed rate, under a Board-approved policy that also states how many switches are allowed. Borrowers must additionally be given the choice to raise the EMI, extend the tenor, or combine both — and to prepay in part or full at any time, with foreclosure/pre-payment charges as per extant rules.
Third, all switching and incidental charges must be transparently disclosed in the sanction letter. Tenor extension must never cause negative amortisation (where the balance grows). And the lender must give the borrower a quarterly statement showing principal and interest recovered, current EMI, EMIs remaining and the APR for the full tenor — written simply.
These rules also apply, with necessary changes, to all equated-instalment loans of any periodicity, not just monthly. For a LAP book, the practical work is policy, sanction-letter language, reset communications and quarterly statementing.
Yes. 'Personal loans' uses RBI's broad retail definition, and the rules extend mutatis mutandis to all equated-instalment loans — floating-rate LAP to individuals is covered.
Since the 1 October 2025 update, the lender may at its option offer the fixed-rate switch under a Board-approved policy — earlier the wording was mandatory ('shall').
No. Extension must not cause negative amortisation — the outstanding balance cannot grow because the EMI no longer covers the interest.
A simple statement of principal and interest recovered to date, the EMI amount, EMIs remaining and the APR for the entire tenor.
Lenders had to extend it to existing and new loans by 31 December 2023, with a communication sent to all existing borrowers.