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Sign in to searchRBI Issues New Banking Rules from October 1, 2025
The Reserve Bank of India has announced a set of significant banking reforms effective from October 1, 2025, aimed at improving monetary policy transmission, borrower protection, and operational flexibility for banks. These measures reflect RBI’s evolving approach to balance financial stability with growth and customer-centric lending.
A key reform relates to flexibility in loan spread adjustment. Earlier, banks were permitted to revise the spread over the benchmark lending rate only once every three years. From October 2025, banks are allowed to reduce spreads earlier, if justified. This change addresses a major weakness in monetary transmission, where repo rate cuts were not fully passed on to existing borrowers, despite India following the external benchmark-based lending rate (EBLR) system since 2019.
Another important reform is the introduction of a floating-to-fixed interest rate option for personal loans. Borrowers can now switch to a fixed rate during reset periods, providing protection against future interest rate volatility. This enhances borrower choice and improves predictability of household finances, particularly in a tightening interest rate environment.
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RBI issues new banking rules from October 1, 2025, improving monetary policy transmission, borrower protection, and credit access. Key reforms include early spread reduction and floating-to-fixed rate options.
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