Reserve Bank of India (Commercial Banks – Interest Rates on Advances) Directions, 2025

1. Start date

These Directions took effect on the day RBI issued them.

BankPulse example. There is no gap here between issue and effect. The Directions come into effect immediately upon issuance. A bank cannot wait for a separate start date, because there is none.

2. In force at once

The rules took effect the day they were issued. There was no grace period.

3. Who is covered

This rule applies to commercial banks, called 'banks' here.

4. Meaning of Commercial Banks

Commercial Banks here means normal banks and SBI, not Small Finance or Payment Banks.

BankPulse example. The word banks on this page has a narrow meaning. It covers banking companies, the corresponding new banks and the State Bank of India. It leaves out small finance banks, payment banks and local area banks.

5. Foreign branches excluded

These Directions do not apply to foreign branches of Indian banks.

1. Fixed rate floor

Fixed rate loans under three years cannot be priced below the matching benchmark rate.

2. Board-approved deposit policy

The Board of Directors must approve the bank's policy on deposit interest rates.

3. Monthly interest charging

Banks must charge interest on all advances every month, not less often.

4. Microfinance pricing policy

The Board must approve a separate policy on how microfinance loans are priced.

5. FCNR(B) loans included

The interest rate rules also apply to loans given against FCNR(B) deposits.

1. The 30 per cent rule

The MCLR tenor follows the single largest maturity bucket holding more than 30 per cent of the funds.

2. When no bucket dominates

If no bucket crosses 30 per cent, the tenor follows the weighted average of the largest buckets together crossing it.

3. Monthly MCLR publication

The Board must review and publish the bank's MCLR every month.

4. External benchmark loans

Floating rate home, auto and MSME loans must be linked to an External Benchmark Rate.

5. One benchmark per category

A bank must use only one external benchmark within each loan category.

6. Base Rate era

Base Rate was the benchmark for loans made between July 2010 and March 2016.

1. Risk premium protection

A bank cannot raise an existing borrower's risk premium without a real reason.

2. No negative spread

The spread components a bank charges a borrower cannot be negative.

3. Three-month reset rule

Interest rates linked to an external benchmark must reset at least once every three months.

4. Yearly MCLR reset

Banks must reset floating loan rates under MCLR once a year or sooner.

1. Older rules cancelled

This document cancels the earlier conduct rules for these institutions.

2. Earlier repeals stand

Guidelines already repealed before these Directions stay repealed.

3. Old rules stay repealed

Rules repealed before this document was issued remain repealed.

4. Old actions preserved

Anything already done under the old rules stays governed by those old rules.

5. Approvals carried over

Approvals given under the cancelled rules are now treated as given under these rules.

6. Other laws still apply

These Directions add to other laws. They do not replace any of them.

7. RBI's reading final

RBI's interpretation of any part of these Directions is final and binding.