Reserve Bank of India (RBI) announced seven major regulatory amendments in October 2025 to strengthen monetary policy transmission, facilitate lending to gold-based industries, ease capital-raising norms, and streamline credit information reporting.
Three of these directions take immediate effect, while four others have been issued as drafts for public comments.
Background
As per the RBI (Interest Rate on Advances) Directions, 2016, banks must link all floating-rate retail and MSME loans to an external benchmark (e.g., repo rate, T-bill rate).
Key Announcements
Interest Rates and Floating-Rate Loan Improvements
- Banks can now reduce the spread on floating-rate loans even before the 3-year lock-in period ends.
- This will enable faster transmission of policy rate cuts to customers — leading to lower EMIs.
- Borrowers can be offered the option to switch to fixed-rate loans at reset intervals, but it is no longer mandatory.
Amendments to Gold and Silver Loan Rules
- New amendments to the “RBI (Lending Against Gold and Silver Collateral) Directions, 2025” allow:
- Banks and Tier-3 & Tier-4 Urban Cooperative Banks to extend working capital loans to industries using gold/silver in production.
- This expands eligibility beyond jewelers to industrial users of gold/silver.
- However, lending for investment/speculative purposes remains prohibited.
- Gold ETFs and mutual fund units continue to remain outside permissible collateral.
Basel III and Large Credit Exposure Amendments
- The limit for Perpetual Debt Instruments (PDI) issued abroad, forming part of Additional Tier-1 (AT1) Capital, has been increased.
- Banks can now raise foreign currency or rupee-denominated perpetual debt up to 1.5% of risk-weighted assets (RWAs).
- This provides greater flexibility to raise capital from international markets.
Revised Rules for Gold Metal Loans (GML)
- The Gold Metal Loan (GML) scheme, first introduced in 1998, is being liberalised further.
- New provisions:
- Repayment tenor extended from 180 days to 270 days for domestic jewellers.
- GML eligibility expanded to include domestic non-manufacturers outsourcing jewellery production.
- Draft directions aim to harmonize lending norms across exporter and non-exporter segments and give banks freedom to frame their own policies.
Guidelines on Management of Intragroup Transactions & Exposures (ITE), 2025
- The amendments clarify prudential treatment of exposures of foreign banks operating as branches in India.
- Aligns norms between Large Exposures Framework (LEF) and Intragroup Exposures to ensure consistency in reporting and capital adequacy treatment.
Credit Information Reporting – Higher Frequency
- RBI (Credit Information Reporting) Directions, 2025 now mandate fortnightly or shorter intervals for credit data submission by Credit Institutions (CIs) to Credit Information Companies (CICs).
- This ensures more up-to-date Credit Information Reports (CIRs), supporting better risk-based lending decisions.
Faster Data Submission and Error Rectification
- CIs must adopt faster data submission and error correction mechanisms.
- Reporting format now requires inclusion of Central KYC (CKYC) number for consumer credit data to facilitate efficient data aggregation by CICs.
Significance of Reforms
- Improved Monetary Transmission: Faster policy rate benefits to borrowers.
- Boost for MSMEs & Industry: Easier access to gold/silver-backed working capital.
- Strengthened Banking Capital: Enhanced flexibility in Tier-1 capital mobilisation abroad.
- Transparency in Credit System: Real-time data improves lending discipline and credit scoring.
- Ease of Business: Simplified norms reduce regulatory bottlenecks for both banks and borrowers.
About Reserve Bank of India (RBI)
- Established: 1 April 1935
- Nationalised: 1 January 1949
- Headquarters: Mumbai, Maharashtra
- Current Governor (as of 2025): Shaktikanta Das
- Primary Functions:
- Monetary Policy formulation (through MPC – Monetary Policy Committee)
- Regulation of banks & NBFCs
- Issuance of currency (except ₹1 note and coins by GoI)
- Management of foreign exchange under FEMA, 1999
- Maintenance of price stability and financial stability
Key Financial Terms
Perpetual Debt Instrument (PDI):
- A debt instrument with no maturity date; used by banks to strengthen capital adequacy (AT1 capital under Basel III).
Additional Tier-1 (AT1) Capital:
- Core component of bank capital used to absorb losses while maintaining solvency; includes PDIs.
Basel III Norms:
- International banking regulations developed by the Basel Committee on Banking Supervision (BCBS) aimed at improving capital adequacy, stress testing, and liquidity.
External Benchmark Lending Rate (EBLR):
- Interest rate benchmark linked to RBI’s repo rate or T-bill yields for fair loan pricing.
Credit Information Company (CIC):
- Entities like CIBIL, Experian, Equifax, and CRIF High Mark that collect and share borrowers’ credit history with lenders.
CKYC (Central KYC Registry):
- A centralised repository of KYC records managed by Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI).
Background Linkages
- Gold Monetisation Scheme (2015): Enabled mobilisation of idle gold deposits into the banking system.
- Large Exposure Framework (2019): Limits banks’ exposure to a single counterparty to 20% of their eligible capital base.
- RBI Act, 1934: Governs the functioning and authority of the Reserve Bank of India.