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RBI Loan Pricing Rules: External Benchmarks, APR Caps and the April 2027 Deadline
RBI draft rules push banks toward external benchmarks, cap total charges on small-value loans and set an April 2027 effective date for new pricing framework.
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The Reserve Bank of India has proposed a sweep of new loan pricing rules that aim to make lending rates more transparent and consistent across banks and non-bank lenders. Under the draft framework released for public comment, lenders would need board-approved pricing policies, link most floating-rate loans to a benchmark, and cap total charges on small-value loans.
The proposals are open for comment until Sept. 11, 2026, and are set to take effect from April 1, 2027 if finalized.
Commercial banks would have to link floating-rate retail loans and loans to micro, small and medium enterprises to an external benchmark. Non-banking financial companies, regional rural banks and cooperative banks get to decide on their own framework. For NBFC borrowers, that means the same benchmark-linking seen at banks is not guaranteed.
The benchmark-plus system
Both fixed and floating-rate loans would follow a benchmark-plus-spread structure. The benchmark generally must reset at intervals of no more than three months. Interest would be calculated on a daily reducing balance using the actual/actual day-count convention, which changes the arithmetic from the current system at some lenders.
The spread can include a credit risk premium, operating costs, term premium and a business strategy premium. The credit risk premium can be revised if the borrower's credit profile changes following a comprehensive review. Other spread components cannot be revised for three years, with some exceptions.
For lenders with total deposits above ₹1,000 crore, the internal benchmark would be based on the marginal cost of funds calculated using a three-month moving average. They would have to publish that benchmark on the first calendar day of each month.