The Reserve Bank of India has issued the Draft Reserve Bank of India (Interest Rates on Loans and Advances) Directions, 2026 for public comments. The draft was released after an announcement in the Statement on Developmental and Regulatory Policies dated August 05, 2026.
The central bank said the draft directions are meant to create a harmonised framework for how regulated entities determine interest rates on loans and advances. The framework covers both fixed rate and floating rate loans.
Who the draft directions apply to
For the consultation stage, the draft direction has been issued as a common document applicable to all regulated entities. The RBI said final directions will be issued separately for each category of regulated entity after it examines the feedback received.
The regulated entities referred to in the release include Commercial Banks, Small Finance Banks, Local Area Banks, Non-Banking Financial Companies, All India Financial Institutions, Regional Rural Banks, Urban Cooperative Banks and Rural Cooperative Banks.
Why RBI has proposed changes
The RBI said it has issued instructions from time to time on interest rates for loans and advances. These instructions have aimed at effective monetary policy transmission, appropriate pricing of credit risk, and fair and non-discriminatory treatment of borrowers.
At present, the regulatory framework on interest rates on advances is more detailed for Commercial Banks, including Small Finance Banks and Local Area Banks. It includes instructions on internal and external benchmark-based lending frameworks for floating rate loans and the determination of spreads over such benchmarks.
For other regulated entities, including NBFCs, All India Financial Institutions, Regional Rural Banks, Urban Cooperative Banks and Rural Cooperative Banks, the existing instructions are largely related to conduct aspects, according to the RBI release.
The RBI also noted differences in some practices among Commercial Banks. These include the determination of MCLR, which is an internal benchmark, and its components. The release further said that existing guidelines contain very limited regulatory instructions for fixed rate loans.
What the proposed framework covers
The draft directions propose a broad, principles-based framework for determining interest rates on loans and advances. The RBI said the framework would be aligned with the nature, complexity and scale of operations of the regulated entities.
The proposal covers both fixed rate loans and floating rate loans. This is significant in the context of the RBI’s own statement that current instructions on fixed rate loans are limited, while more detailed rules already exist for floating rate loan benchmarks in the case of Commercial Banks.
How to send feedback
Regulated entities, stakeholders and members of the public can submit comments or feedback on the draft directions on or before September 11, 2026.
The RBI said feedback may be submitted through the Connect 2 Regulate section on the Reserve Bank’s website. Comments may also be sent by email with the subject line: Feedback on (full name of the draft Amendment Directions).
The press release was issued under the name of Brij Raj, Chief General Manager. The release number is 2026-2027/877.
Source: Reserve Bank of India Press Releases.