RBI proposes to harmonise framework on interest rates on advances: Malhotra
Mumbai, Aug 5, 2026
The proposed framework seeks to standardise loan pricing, benchmark reset dates and interest calculation practices while strengthening transparency and consumer protection
The Reserve Bank of India (RBI) on Wednesday proposed to harmonise and standardise the regulatory framework on interest rates on advances for all regulated entities to enhance transparency in lending rates and strengthen consumer protection.
During the monetary policy press conference, Governor Sanjay Malhotra said the proposed changes, however, will not have any major changes to the existing lending-rate framework or for the non-banking financial companies (NBFCs) with regards to bringing them under the external benchmark-linked lending rate (EBLR) regime.
In its statement on development and regulatory policies, RBI said that the proposed rationalisation aims to harmonise the guidelines across REs while maintaining proportionality address certain operational aspects of the current framework on MCLR and EBLR; and standardise certain divergent market practices concerning interest charging, including day count convention and benchmark reset dates.
These measures are set to ensure uniformity, enhance transparency in loan pricing, strengthen monetary transmission and bolster consumer protection.
During the post MPC press meet, Malhotra said that, “We have introduced these rules to standardize them. This will increase transparency. People will know how the interest rates are set. This is a rationalization exercise which will increase consumer protection.”
“There is no major change in requirement as you are referring to with regard to NBFCs and bringing them on to EBLR etc. There is no major change, it is only a rationalization,” he added.
According to State Bank of India (SBI’s) Report, pricing of bank loans has long history of evolution keeping in mind transparency and monetary policy transmission imperatives. Up till 2010 banks used the Prime Lending Rate, followed by the base rate.
After 2016, banks have migrated to MCLR that links the lending rates to marginal cost of fund. To further increase the transmission, in 2019 RBI permitted EBLR. Currently, 67.6 per cent of the bank loan are under EBLR regime.
“These parallel regimes need some standardization to ensure uniformity, enhance transparency in loan pricing, strengthen monetary transmission and bolster consumer protection. The proposed measure is steering the loan pricing policy in this direction,” SBI Report said.
[The Business Standard]
