Reserve Bank of India (Urban Co-operative Banks – Interest Rates on Advances) Directions, 2025
UR
- Applies toUrban co-operative banks
- StatusIn force
- IssuedNov 28, 2025
- Amendmentsnone tracked
- Length30 points in 5 sections · 3 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNov 28, 2025The day this rule starts to apply, as RBI's own text states it.
- Time to get readyNoneIt starts to apply on the day it was published.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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25 of the 30 points name no product and bind every product. All products.
What it says
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Stated by RBI — RBI’s own paragraph says this. We have only made it plainer.
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Chapter I. Preliminary
1. Starts at once
The rules start the moment RBI issues them.
2. Who must follow this
These rules apply to every urban co-operative bank.
3. What an urban bank means
An urban co-operative bank is a primary co-operative bank under the banking law.
Chapter II. General guidelines
Must know
1. The bank sets its rate
The bank fixes its lending rates itself, with its board's approval.
2. Rates must be open
The rates charged must be clear and known to every customer.
3. A rate can be usurious
Beyond a level a rate is usurious, and that is not normal banking.
4. Interest every month
Interest is charged on all advances at monthly rests.
5. Long crops once a year
On a long duration crop the interest is charged at annual rests.
6. Short crops follow the season
For short crops the bank may follow harvesting and marketing seasons.
7. Price on the borrower's rating
The risk charge must be reasonable and tied to the borrower's own internal rating.
8. Security counts in the risk
Whether there is security, and what it is worth, must be weighed too.
9. The whole cost be fair
Interest and every other charge together must be justifiable against real cost.
10. Interest cannot pass the loan
For a small or marginal farmer the interest debited cannot exceed the principal.
11. Five acres and less
RBI defines that farmer here: a land holding of 5 acres and less.
BankPulse example. A farmer with 4 acres takes a short term crop loan. He is inside RBI's 5 acres, so the interest the branch debits can never grow past the loan itself. A farmer with 9 acres is outside that line and this protection does not reach him.
12. Small loan rates too
Rates and fees on microfinance loans must not be usurious either.
13. RBI will look at them
These rates and charges are open to supervisory scrutiny by RBI.
Do it
14. Publish the highest and lowest
The bank must publish its minimum and maximum interest rates.
15. Show them in every branch
That information must be displayed in every branch of the bank.
16. The board writes the rules
The board must lay down the bank's own principles and procedures on this.
17. Check the cash flow first
A small personal loan needs a proper approval step that looks at the borrower's cash flow.
18. Set a ceiling, publish it
A ceiling on interest and charges may be fixed, and should be made public.
19. A policy for small loans
The board must approve a policy on how microfinance loans are priced.
20. Write the rate model down
It needs a documented way of reaching the all-inclusive interest rate.
21. Break the rate into parts
Cost of funds, risk premium and margin must be set out separately.
22. A spread range per borrower
The policy must give the range of each part for each borrower category.
23. A ceiling on small loans
It must also carry a ceiling on the rate and every other charge.
Chapter III. Repeal and Other Provisions
1. Old rules stand repealed
The earlier lending rate rules for these banks are repealed.
2. Old actions still stand
Anything done under the old rules stays governed by those old rules.
3. Old approvals still count
Approvals given under the repealed rules now come under these rules.
4. Other laws still apply
These rules add to other laws. They do not cut them down.
The same subject for other kinds of institution
The same subject for other kinds of institution.
Other RBI rules for urban co-operative banks
RBI capital adequacy rules for urban co-operative banks 2025
RBI compliance officer and compliance function rules for urban co-operative banks
RBI concurrent audit rules for urban co-operative banks 2026
RBI credit bureau reporting rules for urban co-operative banks 2025
RBI credit card and debit card rules for urban co-operative banks 2025
RBI customer service and fair conduct rules for urban co-operative banks 2025
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