The Reserve Bank of India has issued comprehensive circulars on uniform interest rate norms aimed at improving transparency and standardisation in lending rate disclosures across all regulated entities. According to reports from Business Standard, The Economic Times, and The Times of India, RBI Governor Sanjay Malhotra announced the proposal as part of the August 5 monetary policy decisions, emphasizing that the central bank plans to bring greater uniformity in the way banks, non-banking financial companies (NBFCs) and other regulated entities determine and communicate lending rates. The proposal seeks to harmonise the existing guidelines while retaining proportionality for different categories of regulated entities. In its Statement on Developmental and Regulatory Policies, the RBI stated that the proposed framework aims to harmonise interest rate guidelines across regulated entities while maintaining proportionality, addressing certain operational aspects of the existing marginal cost of funds-based lending rate (MCLR) and external benchmark lending rate (EBLR) frameworks. As per The Economic Times, the new framework will be principle-based and will not bring NBFCs into the external benchmark regime, with the RBI emphasizing that there will be no major changes to the interest rate calculation structure for NBFCs, but only a rationalisation of existing norms. According to The Times of India, the move to harmonise interest rate frameworks across regulated entities is likely to standardise loan pricing and improve monetary transmission while reducing the pricing discretion currently available to NBFCs. The RBI has indicated that draft directions incorporating these proposals will be issued shortly for public consultation, ensuring comprehensive stakeholder engagement in the implementation process.
Under the revised framework, banks are now required to publish interest rates applicable to all deposits, including bulk deposits, on their websites in advance. As reported by Business Standard, interest rates on bulk deposits must be displayed on every business day by 10 a.m., with a maximum grace period until 10:10 a.m.. The RBI has provided banks with leeway up to 10 a.m. for publishing bulk deposit rates, addressing the previous lack of standardisation in timing. The proposed framework seeks to standardise divergent market practices relating to interest charging, including day-count conventions and benchmark reset dates. To reinforce transparency, small finance banks will have to publish their deposit interest rate schedules in advance, with the interest paid on both regular and bulk deposits must be in line with the rates displayed on the bank's official website. This will allow customers to compare FD rates across banks more easily and reduce ambiguity over the returns they can expect. According to The Economic Times, the measures seek to ensure uniformity, enhance transparency in loan pricing, strengthen monetary transmission, and bolster consumer protection. For better transparency, RBI directed banks to switch to external benchmarks like repo for loans from the earlier Marginal Cost of Funds framework in 2019, with banks required to link all new floating-rate loans for housing, auto and MSMEs to an external benchmark like repo from October 1, 2019, to ensure faster transmission of policy rate cuts to borrowers.
The RBI has implemented strict rules prohibiting small finance banks from offering different FD rates for identical deposits, with the central bank stating that deposit interest rates should be consistent across all branches and customers. In practical terms, if two customers invest the same amount in a fixed deposit of the same tenure with the same small finance bank on a particular day, both must receive the same interest rate. Banks will not be permitted to offer preferential rates to select customers for identical deposits unless the differentiation falls within the RBI's permitted framework. The objective is to ensure fairness and prevent situations where depositors receive different returns despite investing under identical terms. The move is also expected to boost confidence among retail investors by making FD pricing more predictable and transparent. By mandating advance disclosure of interest rates and uniform pricing for retail deposits, the RBI aims to strengthen consumer protection while allowing small finance banks adequate flexibility to manage their funding needs. According to The Economic Times, Deputy Governor Shirish Chandra Murmu emphasized that the emphasis is on transparency and conduct-related measures in the new framework. Industry experts have welcomed the RBI's comprehensive approach to interest rate standardisation. Vinod Francis, Chief Financial Officer at South Indian Bank, noted that the proposed rationalisation is a welcome step towards improving transparency, enhancing customer understanding and strengthening monetary policy transmission. Vivek Iyer, Partner at Grant Thornton Bharat, emphasized that conduct risk continues to remain a key regulatory focus alongside improving the ease of doing business.
While the RBI has standardised pricing for retail deposits, it has retained flexibility for bulk deposits. Banks may continue to offer different interest rates on bulk deposits, provided the pricing policy is clearly defined and disclosed in advance. The variation may be based on factors such as deposit stability, liquidity management requirements and other prudential considerations under the RBI's regulatory framework. For regulatory purposes, a bulk deposit refers to a single rupee term deposit of ₹3 crore or more in the case of scheduled commercial banks and small finance banks. The same flexibility is available for eligible bulk deposits accepted from non-resident customers, with the amended directions coming into effect on October 1, 2026. The new framework also makes it easier to compare FD offerings across small finance banks, bringing greater transparency and consistency to the deposit market while ensuring that identical deposits earn identical returns regardless of the branch where they are opened. The external benchmarks, to which banks are required to link their lending rates, could be repo, 3-month or 6-month treasury bill yield, or any other benchmark published by the Financial Benchmarks India Private Ltd (FBIL).
The proposed framework is expected to have significant implications for non-banking financial companies, particularly housing finance companies and microfinance providers who will be subject to the new norms. According to The Times of India, the framework is expected to push NBFCs towards standardised benchmarking of floating rate loans, marking a departure from the current structure where commercial banks operate under structured benchmark systems, while NBFCs retain greater flexibility through internal, board-approved prime lending rate models. Industry experts have welcomed the RBI's comprehensive approach to interest rate standardisation. Vinod Francis, Chief Financial Officer at South Indian Bank, noted that the proposed rationalisation is a welcome step towards improving transparency, enhancing customer understanding and strengthening monetary policy transmission. Vivek Iyer, Partner at Grant Thornton Bharat, emphasized that conduct risk continues to remain a key regulatory focus alongside improving the ease of doing business. The central bank indicated that draft directions incorporating these proposals will be issued shortly for public consultation, ensuring comprehensive stakeholder engagement in the implementation process. According to The Economic Times, the proposed changes are unlikely to affect EMIs or bring NBFCs into the external benchmark regime, with the RBI stating that there will be no major changes to the interest rate calculation structure for NBFCs. Ananth Shroff-Co founder and CEO at DPDzero noted that the RBI's move to harmonise lending rate regulations is fundamentally about transparency, not uniformity, explaining that at present, banks and NBFCs operate under different regulatory frameworks for determining and disclosing loan interest rates, making it difficult for borrowers to compare loan products across institutions. Vijendra Singh Shekhawat, CEO of Choice Finserv Private Limited, explained that the proposal addresses fragmentation rather than rate levels, noting that borrowers currently navigate different lending systems with older loans linked to MCLR, newer ones tied to external benchmarks, and NBFCs following their own pricing methods. Kapil Makhija, Chief Operations Officer at MinEMI, emphasized that the benefit will come through more predictable transmission of future repo rate changes, particularly for loans with shorter reset cycles.
