RBI issues new directions to banks for interest rate on advances and lending against gold & silver collateral

MUMBAI: The Reserve Bank of India (RBI) has issued new directions to banks, effective from October 1, 2025, covering interest rate on advances, lending against gold and silver collateral, and capital regulations.

Along with these, the central bank has also released draft guidelines for public comments on gold metal loans, large exposures, intragroup transactions, and credit information reporting.

In an official statement on Monday, the RBI stated, “RBI has today issued seven Directions/Circulars, proposing to amend some of the extant Directions/Circulars applicable to banks and other regulated entities”.

The guidelines stated that under the Reserve Bank of India (Interest Rate on Advances) (Amendment Directions), 2025, rules for floating rate loans have been revised.

At present, floating rate retail and MSME loans are linked to an external benchmark, with banks allowed to set a spread. Other than the credit risk premium, these spreads could be changed only once in three years.

As per the new rules, banks can now reduce spread components earlier than three years to benefit borrowers. Further, instead of being mandatory, it will be at the discretion of banks to provide an option of switching to a fixed rate at the time of reset in EMI-based personal loans.

RBI stated, “Banks may reduce the other spread components for the benefit of the borrower earlier than three years; Banks may, at their discretion, provide the option to switchover to fixed rate at the time of reset at their discretion”.

On lending against gold and silver, the Reserve Bank of India (Lending Against Gold and Silver Collateral – 1st Amendment Directions), 2025, extends the earlier carve-out, which permitted such loans only for jewellers.

Now, borrowers using gold as a raw material in manufacturing or industrial processing will also be eligible. Tier 3 and Tier 4 Urban Co-operative Banks have also been allowed to provide such loans, similar to scheduled commercial banks.

The Reserve Bank of India (Basel III Capital Regulations – Perpetual Debt Instruments in Additional Tier 1 Capital – Eligible Limit for Instruments Denominated in Foreign Currency/Rupee Denominated Bonds Overseas) Directions, 2025, have also been notified.

These continue to provide the framework for scheduled commercial banks, excluding regional rural banks.

Apart from these three mandatory directions coming into effect from October 1, 2025, the Reserve Bank of India has also issued four draft guidelines for public feedback.

The draft Gold Metal Loans (GML) Directions, 2025 propose to extend the repayment ceiling for jewellers to 270 days from the current 180 days and allow GML to domestic non-manufacturers who outsource jewellery production.

Another one is the draft amendments to the Large Exposures Framework (LEF) and Guidelines on Management of Intragroup Transactions and Exposures (ITE) clarify prudential treatment of exposures of Indian branches of foreign banks to their head offices, extend credit risk mitigation benefits, and link the ITE threshold to Tier-1 capital instead of paid-up capital and reserves.

Further, under the draft Credit Information Reporting (1st Amendment) Directions, 2025, credit institutions may be required to submit data to Credit Information Companies on a weekly basis, instead of fortnightly, along with faster data submission, error rectification, and capturing CKYC numbers in consumer records.

Comments on these draft guidelines have been invited till October 20, 2025. (ANI)