In a major relief to borrowers, the Reserve Bank of India (RBI) has introduced several borrower-friendly amendments to lending guidelines, effective from October 1. These reforms, aimed at reducing financial stress on individuals and businesses, are expected to make credit more affordable and accessible.
Relief for Floating-Rate Loan Holders
Borrowers with floating-rate loans will now benefit from greater flexibility:
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Lower EMIs Without Lock-In: Loan holders can seek bank consent to reduce EMIs even before the three-year lock-in period ends if interest rates fall.
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Option to Switch Loan Type: Banks can allow borrowers to voluntarily shift from fixed-rate loans to floating-rate loans, ensuring repayments align with market trends.
According to RBI officials, this will particularly benefit the middle-class households burdened with housing and vehicle loans.
Gold Loan Reforms to Aid MSMEs
Recognising the importance of gold in the unorganised and MSME sector, RBI has relaxed gold loan norms:
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Extended Tenure: The Gold Metal Loan (GML) repayment period has been increased from 180 days to 270 days.
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Wider Access: Non-manufacturing jewellery sellers can now use GML for outsourcing jewellery production.
These steps are expected to improve liquidity for jewellers, goldsmiths, and small traders, ensuring a smoother flow of working capital.
New Provisions for Banks to Raise Capital
To enhance lending capacity, RBI has permitted banks to:
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Issue foreign currency or rupee-denominated bonds abroad.
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Expand funding options while maintaining stricter checks on large exposures and inter-group transactions in foreign bank branches.
This will strengthen the capital base of banks, accelerating their ability to provide credit.
Greater Transparency in Credit Information
In an effort to improve transparency and efficiency in credit reporting, RBI has announced:
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Weekly Credit Data Updates: Credit bureaus will now update borrower data weekly instead of bi-weekly.
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Error Reduction and Faster Rectification: Measures to ensure greater accuracy in credit reports.
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CKYC Integration: Central Know Your Customer (CKYC) numbers will be integrated for quicker verification.
Three of these reforms come into effect immediately, while four await final approval.
Towards Inclusive Growth with Strong Oversight
These initiatives reflect RBI’s commitment to making financial growth more inclusive and borrower-friendly. However, experts caution that strict supervision is necessary to ensure these benefits reach the grassroots level and are not hindered by hidden complexities.