The Reserve Bank of India (RBI) has proposed a comprehensive overhaul of the regulatory framework governing interest rates on advances to bring greater transparency and consistency across all regulated entities. Announcing the proposal, RBI Governor Sanjay Malhotra said the initiative aims to harmonise lending rate guidelines while strengthening consumer protection and improving the transmission of monetary policy.
According to the RBI, the proposed framework seeks to standardise key operational aspects of the existing Marginal Cost of Funds-Based Lending Rate (MCLR) and External Benchmark Lending Rate (EBLR) systems. It also aims to address divergent market practices related to interest calculation, including day count conventions and benchmark reset dates. The central bank believes these measures will promote uniformity in loan pricing, enhance transparency and ensure fairer lending practices for borrowers.
The RBI said draft directions incorporating these proposals will be released shortly for public consultation before the new framework is finalised. The move follows the central bank’s recent reforms to deposit interest rate regulations introduced in July. Under the revised norms, banks are allowed to offer different interest rates on bulk deposits based on their liquidity risk profile, while ensuring uniform rates for similar deposits across all branches and customers. Together, these measures reflect the RBI’s continued efforts to strengthen financial sector transparency, improve policy transmission and safeguard consumer interests.
