The Reserve Bank of India (RBI) on November 28, 2025, notified the Reserve Bank of India (Local Area Banks - Interest Rates on Advances) Directions, 2025.
The following has been stated: -
•The RBI (Local Area Banks – Interest Rates on Advances) Directions, 2025, provide a framework for LABs to determine interest rates on loans, including fixed, floating, microfinance, and foreign currency advances.
•Banks must have Board-approved policies, link floating rates to internal (Base Rate/MCLR) or external benchmarks, and define spreads transparently.
•Interest rates must be periodically reviewed, reset according to the benchmark, and comply with prescribed ceilings, especially for microfinance and agricultural loans.
•Existing loans under old systems (BPLR/Base Rate/MCLR) may continue, with borrowers allowed to switch to new benchmark-linked rates on mutually acceptable terms.
•These directions shall become effective on November 28, 2025.
[Notification No.: RBI/DOR/2025-26/235 DOR.CRE.REC.154./13.03.000/2025-26]
