The Reserve Bank of India (RBI) on November 28, 2025, released the Reserve Bank of India (Small Finance Banks – Interest Rates on Advances) Directions, 2025 for public comments. Issued under Sections 21 and 35A of the Banking Regulation Act, 1949, the Directions aim to establish a transparent and standardized framework governing the determination and application of interest rates on loans and advances sanctioned by Small Finance Banks (SFBs).
The mandates that SFBs adopt a Board-approved policy on interest rate determination, including pricing for microfinance loans. It allows SFBs to offer advances at fixed or floating rates, with all floating rate loans linked to specified internal or external benchmarks such as the RBI Repo Rate or Treasury Bill yields published by FBIL. Interest must be charged at monthly rests, and agricultural loans receive special treatment based on crop cycles. The guidelines also stress fairness in pricing small-value and personal loans to avoid usurious rates.
Further, the prescribes detailed frameworks for internal benchmarks like Base Rate and Marginal Cost of Funds based Lending Rate (MCLR), covering methodology, review frequency, and cost components. It ensures consistency, transparency, and borrower protection while providing operational flexibility to SFBs. These Directions will come into force upon publication on RBI’s official website.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/192 DOR.CRE.REC.111./13.03.000/2025-26]
