New Delhi: The Reserve Bank of India (RBI) has rolled out key changes to its banking rules. This gives banks more flexibility while ensuring added benefits for borrowers. Three of these amendments will come into effect from October 1, while four others have been shared as drafts for public feedback.
Easier Loan Options for Borrowers
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Now, lenders can reduce parts of the spread on floating-rate loans sooner than the earlier three-year limit, giving borrowers quicker relief. Banks can also let customers switch from floating to fixed rates when interest rate resets occur. These changes cover personal, retail, and MSME loans.
Expanded Gold-Backed Loan Options
The RBI’s new amendments make it easier for businesses using gold as raw material in manufacturing or industrial processes to access working capital loans. Additionally, Tier 3 and Tier 4 Urban Co-operative Banks can now offer similar loans, bringing them in line with the rules for scheduled commercial banks.
More Flexibility for Bank Capital
The RBI has updated rules for Basel III capital regulations concerning Perpetual Debt Instruments (PDIs). Banks can now issue PDIs in foreign currency or rupee-denominated bonds overseas within revised limits, giving them extra room to boost their Tier 1 capital through international markets.
The RBI has put forward four draft directions and is seeking comments from stakeholders until October 20. Some of the key proposals are aimed at improving banking practices and improving benefits for borrowers. They are:
Easier Terms for Gold Metal Loans
Under the new draft guidelines, banks can now offer Gold Metal Loans (GML) with longer repayment periods of up to 270 days. Loans can also be extended to domestic non-manufacturers who outsource jewellery production, making financing more accessible.
Clearer Rules for Foreign Bank Exposures
The RBI’s draft changes for the Large Exposures Framework (LEF) and Intra-Group Exposures (ITE) aim to provide clarity for foreign banks operating in India. The updates cover how exposures are calculated, risk mitigation measures, and how thresholds are linked to Tier-1 capital.
Faster and More Accurate Credit Reporting
Under the draft guidelines, credit institutions may switch to weekly reporting to Credit Information Companies, ensuring borrowers’ credit data stays current. The updates also include faster data submission, easier error correction, and improved CKYC data capture.
Stakeholders can provide their comments through the RBI’s “Connect 2 Regulate” portal or by emailing the Department of Regulation. According to the RBI, these changes are designed to give banks more operational flexibility, make credit more accessible for borrowers, and ensure credit reporting is timely and accurate.
These RBI amendments are significant for banks and borrowers alike. Easing rules for gold and silver-backed loans, offering more flexibility in floating-rate loans, and clarifying large credit exposure norms are all set to make the banking system more transparent, efficient, and borrower-friendly.
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