The Reserve Bank of India (RBI) on November 28, 2025, issued the Reserve Bank of India (Rural Co-operative Banks – Interest Rates on Advances) Directions, 2025.
The following has been stated namely: -
• It states that Rural/cooperative banks shall adhere to interest rate directives from the RBI and state cooperative banking regulations when granting advances, ensuring rates are transparent and justifiable.
• These banks may have flexibility in setting interest rates (including penal interest) within limits prescribed by regulation, but shall disclose these rates to borrowers.
• Additional interest or concessions (if any) for specific categories (such as staff or special segments) shall comply with regulatory caps and disclosure norms.
• In cases of loan defaults or overdue advances, the banks may levy penal interest, but they should ensure these charges do not compound excessively and must inform customers of penal rates in advance.
• The bank shall maintain consistency in how interest is computed (e.g., daily, annually) and disclose the method to the borrower.
• Advances shall also observe principles under the Fair Practices Code — interest and all fees must be communicated clearly and understandably to borrowers.
• This shall come into force from November 28, 2025.
[Notification no. - RBI/DOR/2025-26/301 DOR.SOG(SPE).REC.220/13.03.00/ 2025-26]
