The Reserve Bank of India (RBI), on November 28, 2025, issued the Reserve Bank of India (Urban Co-operative Banks - Interest Rates on Advances) Directions, 2025.
The following has been stated:-
• A bank is permitted to determine its lending rates taking into account its cost of funds, transaction costs, etc., with the approval of its Board. It should be ensured that the interest rates charged are transparent and known to all the customers. A bank shall, therefore, publish the minimum and maximum interest rates charged by it, and display this information in every branch. Though interest rates have been deregulated, rates of interest beyond a certain level may be seen to be usurious and can neither be sustainable nor conform to normal banking practice. The board of a bank shall lay down appropriate internal principles and procedures in this regard.
• Interest shall be charged on all advances at a monthly rate. Provided that instructions on charging interest at monthly rests shall not apply to agricultural advances, and a bank shall continue to follow the existing practice of charging/compounding of interest on agricultural advances linked to crop seasons. A bank should charge interest on agricultural advances for long-duration crops at an annual rate. As regards other agricultural advances in respect of short-duration crop and allied agricultural activities such as dairy, fishery, piggery, poultry, bee-keeping, etc., a bank may take into consideration due dates fixed based on fluidity with borrowers and harvesting/marketing season while charging interest and compounding the same if the loan/instalment becomes overdue.
[Notification no. RBI/DOR/2025-26/283 DOR.CRE.REC.202./13.03.000/2025-26]
