RBI proposes to harmonise framework on interest rates on advances: Malhotra

The Reserve Bank of India (RBI) proposed to harmonise and standardise the regulatory framework on interest rates on advances for all regulated entities (REs) to enhance transparency in lending rates and strengthen consumer protection, Governor Sanjay Malhotra said on Monday.

In its statement on development and regulatory policies, the RBI said that the proposed rationalisation aims to harmonise the guidelines across REs while maintaining proportionality to address certain operational aspects of the current framework on marginal cost of funds-based lending rate (MCLR) and external benchmark lending rate (EBLR); and standardise certain divergent market practices concerning interest charging, including day count convention and benchmark reset dates.

These measures would ensure uniformity, enhance transparency in loan pricing, strengthen monetary transmission and bolster consumer protection.

The RBI will also draft directions incorporating these proposals and will be issued shortly for public comments.

In July, the RBI had revised deposit interest rate regulations to improve transparency. It allowed banks to offer different interest rates on bulk deposits based on their liquidity risk profile. Banks will be permitted to offer differential interest rates on bulk deposits after taking into account the rates applicable to deposits or unsecured wholesale funding under the Liquidity Coverage Ratio (LCR) framework.

However, it added that deposit rates must be uniform across all branches of a bank and customers. It cannot discriminate between similar deposits of the same size.

These new norms are effective from October 1, 2026.