Overview
- The Reserve Bank of India issued the draft 'Interest Rates on Loans and Advances Directions, 2026' on August 12, 2026 and opened a public consultation that closes on September 11, 2026.
- The directions would apply to commercial banks, regional rural banks, urban and rural cooperative banks, all-India financial institutions and NBFCs while keeping proportional exemptions for smaller cooperative banks and base-layer NBFCs.
- The draft requires every loan — fixed or floating — to be linked to an internal or external benchmark with a lender-set risk-based spread and bars pricing below the benchmark.
- For lenders that use MCLR the RBI specifies a system-generated, three-month trailing moving average of the marginal cost of fresh domestic deposits and borrowings and requires monthly publication of internal benchmarks.
- Operational rules include reset-frequency limits (no more than once every three months), monthly rests for interest, explicit benchmark and reset terms in loan agreements, a proposed effective date of April 1, 2027, and a migration window for existing loans to April 1, 2029.