Context:

• The Reserve Bank of India (RBI) issued seven directives/circulars for banks and other regulated entities on 29-30 September 2025, of which three key directives came into effect from 1 October 2025.

Key Points:

• The directives mainly relate to interest rates on advances (loans), lending against gold and silver, and capital regulation.
• Public comments have been invited on four draft guidelines, which can be submitted by 20 October 2025.
• These changes aim to provide greater flexibility to banks, benefit borrowers, and strengthen the financial system.

Key Directives Effective from 1 October 2025:

Changes in Gold-Silver Pledge Loan Rules:

1. Expansion of Loans for Industrial and Manufacturing Use:

• Old Rule: Lending against gold/silver was mainly restricted to jewellers.
• New Rule (Effective): Banks, including Tier-3 and Tier-4 urban cooperative banks, can now provide working capital loans to all borrowers using gold or silver as raw material in manufacturing or industrial processes.
• Condition: Banks must ensure that borrowers do not purchase or hold gold/silver for investment or speculative purposes.

2. Change in Loan-to-Value (LTV) Ratio (Proposed):

• LTV: This ratio indicates the maximum loan that can be provided against the value of pledged gold.
• Proposed Change: Increase in LTV ratio for small gold loans:
• For loans up to ₹2.5 lakh, LTV is proposed to increase from 75% to 85% (including interest).
• Benefit: This will allow small borrowers, especially in rural areas and small towns, to receive a higher portion of gold value as loans.

3. Draft Guidelines and Other Proposals:

• Gold Metal Loan (GML) Repayment Period: Proposed increase for jewellers from 180 days to 270 days.
• Non-Manufacturer Jewellers: Domestic non-manufacturer jewellers outsourcing jewellery production may also be allowed to take GML.

Amendments in Floating Rate Loan Rules:

1. Flexibility in Spread:

• Old Rule: Banks could revise spread components (apart from credit risk premium) only once in three years.
• New Rule: Banks can now reduce spread components before the three-year period in a non-discriminatory manner to benefit and retain customers.
• Benefit: This allows banks to reduce interest rates (and EMIs) for existing customers promptly if the RBI reduces the repo rate.

2. Option to Switch to Fixed Rate:

• Old Rule (from August 2023): EMI-based personal loans required borrowers to be offered the option to switch from floating to fixed rate during interest rate reset.
• New Rule: This option is now at the discretion of the bank. Banks may provide it as per their policy; it is no longer mandatory.
• Benefit: Provides banks flexibility to manage risk as per their strategies.

Other Key Changes (Proposed and Effective):

• Prepayment/Foreclosure Charges: RBI has already prohibited prepayment or foreclosure penalties on non-commercial, floating-rate personal loans.
• Gold and Silver Loan Rules: Banks and Tier-3/Tier-4 urban cooperative banks can provide working capital loans to industries using gold/silver as raw material (previously restricted to jewellers).
• Credit Reporting: RBI has proposed that credit institutions submit data to credit bureaus weekly instead of fortnightly, improving accuracy and timeliness.
• Capital Regulation (Basel III – Additional Tier 1 Capital – Perpetual Debt Instruments), 2025:
• This change primarily provides banks greater flexibility in raising Additional Tier 1 (AT1) capital from foreign markets.
• Key Change: Revision of eligible limit for issuing perpetual debt instruments (PDIs) as AT1 capital, especially for instruments issued in foreign currency or as rupee-denominated overseas bonds.
• Objective: To allow scheduled commercial banks (excluding RRBs) greater scope to access international capital markets.
• Impact: Enhances banks’ AT1 capital base and helps meet Basel III capital adequacy norms more effectively.

Draft Guidelines (Feedback Invited):

• Credit Information Reporting Amendments: Weekly submission to credit bureaus (instead of fortnightly), mandatory error correction, faster data submission, and CKYC number capture.
• Large Exposure Framework (LEF) and Intra-Group Exposure: Clear rules for exposure calculation, risk hedging, and thresholds for foreign banks linked to Tier-1 capital.
• Gold Metal Loan (GML) Scheme: Additional guidelines for gold loans.
• Others: Clarity on intra-group exposures.
• Analysis: These drafts aim to make the credit system more accurate and up-to-date, prevent fraud, and simplify KYC via CKYC. Weekly reporting will improve credit scoring but increase compliance burden for banks.

Other Important Changes:

• Improvements in communication and processes between banks and regulators.
• Amendments in banking charges, NPS pension rules, and railway ticket booking regulations.
• The UPI collect request feature will be discontinued to reduce fraud risk.
• Increased supervision to correct errors in positive credit information management and consumer records.

Reserve Bank of India (RBI)

• Established: 1 April 1935 under the RBI Act, 1934
• Nationalization: 1949
• First Governor: Sir Osborne Smith (1935-1937)
• First Indian Governor: C.D. Deshmukh (1943-1949)
• Headquarters: Mumbai, Maharashtra