The Reserve Bank of India (RBI) on January 10, 2025, released FAQ on RBI Circular for Reset of Floating Interest Rates on EMI-Based Personal Loans.
RBI issued a circular on August 18, 2023, outlining guidelines for resetting floating interest rates on equated monthly instalment (EMI)-based personal loans. These guidelines apply exclusively to personal loans and emphasize transparency and flexibility for borrowers. Lenders are required to inform borrowers of the impact of interest rate resets at the time of loan sanction and during the loan tenure. Borrowers have options to address rising EMIs, including increasing tenure, switching to fixed rates, or prepaying loans.
The circular mandates lenders to offer fixed-rate options for all personal loans and allows borrowers to switch between fixed and floating rates, subject to applicable charges. It also covers loans linked to both external and internal benchmarks and applies to existing borrowers. Lenders must ensure compliance with these directives while maintaining transparency in communication and charges.
[Notification No. 2024-2025/1869]
