RBI 2025: Borrowing Made Easier & Credit Norms Tightened

The Reserve Bank of India (RBI) has announced a series of amendments and draft proposals aimed at making borrowing easier, modernizing gold-based lending, and enhancing credit reporting standards. Announced on September 29, 2025, three directives take effect from October 1, while four others are open for public consultation until October 20, 2025.

Flexible Interest Rates for Borrowers

Under the new rules, banks can now reduce spreads on floating rate loans sooner than the previous three-year restriction. This allows borrowers to benefit faster from favorable market conditions. Banks will also have more discretion when offering fixed-rate options during loan resets, improving borrower flexibility in retail segments such as housing and auto loans.

Expanded Loans Against Gold and Silver

The RBI has widened the scope of lending against gold and silver. The new rules allow working capital loans for manufacturers and jewellers using gold as raw material. Tier 3 and Tier 4 urban co-operative banks can also extend such loans, supporting regional jewellers and small businesses.

Enhanced Capital Raising Options for Banks

Banks will gain more flexibility in issuing Perpetual Debt Instruments (PDIs) under Basel III, including raising Tier 1 capital via rupee or foreign currency bonds abroad. This move aims to strengthen balance sheets and diversify funding sources.

Gold Metal Loan (GML) Norms to Be Liberated

The draft proposals seek to modernize the GML scheme, increasing repayment periods for jewellers from 180 to 270 days and allowing non-manufacturers to access loans for outsourced jewellery production. These changes could improve cash flow and financing access for the sector.

Tighter Rules for Foreign Bank Exposures

Amendments to the Large Exposures Framework and intra-group exposure rules will link exposure limits to Tier 1 capital instead of paid-up capital and reserves. The changes aim to enhance risk management and consistency for foreign banks operating in India.

Weekly Credit Reporting for Better Data

To improve credit information quality, banks will report borrower data weekly instead of fortnightly. Including Central KYC (CKYC) numbers in reports will enhance accuracy and traceability, helping lenders make better-informed decisions.

The RBI has invited feedback on the draft proposals via its ‘Connect 2 Regulate’ platform until October 20, 2025, before finalizing the norms later this year.