The Reserve Bank of India (RBI) has unveiled a series of amendments and draft proposals that could reshape borrowing, gold-based lending, capital raising by banks and credit information systems.
Announced through seven directions and circulars on September 29, 2025, three of these changes will take effect from October 1, while four others have been released for public consultation until October 20, 2025.
INTEREST RATE FLEXIBILITY FOR BORROWERS
One of the most important changes relates to how banks set interest rates on floating loans. Under current rules, banks can alter the spread over external benchmarks only once in three years, except for credit risk. This system often left borrowers locked into higher spreads even when market conditions improved.
The new amendment allows banks to reduce spreads earlier, creating scope for borrowers to benefit sooner from favourable lending conditions.
While banks were earlier required to offer a fixed-rate option during resets of floating rate loans, they will now have greater discretion in providing this facility. The move is expected to make retail loans, such as housing and auto loans, more borrower-friendly while giving banks room to adjust lending practices.
EASIER LOANS AGAINST GOLD AND SILVER
The RBI has also widened the scope for lending against gold and silver. At present, banks cannot finance purchases of primary gold or silver, though working capital loans are allowed for jewellers. The amendment now extends this carve-out to borrowers using gold as raw material in manufacturing or industrial processes.
In addition, Tier 3 and Tier 4 urban co-operative banks will also be permitted to extend working capital loans against gold, bringing smaller banks into the fold. This change is likely to benefit regional jewellers and small businesses engaged in gold-based manufacturing.
MORE FLEXIBILITY IN CAPITAL RAISING
To support banks in strengthening their balance sheets, the RBI has revised rules on issuing perpetual debt instruments (PDI) under Basel III.
By raising the eligible limits on PDIs denominated in foreign currency or rupee bonds overseas, banks will gain more headroom to raise Tier 1 capital from international investors. This measure is expected to help banks diversify their funding sources and bolster capital adequacy.
GOLD METAL LOAN NORMS TO BE LIBERALISED
Among the draft proposals, the RBI has suggested a major revamp of the Gold Metal Loan (GML) scheme. First introduced in 1998, GML has been gradually opened up to cover jewellery exporters and domestic manufacturers.
The new draft seeks to harmonise rules across the jewellery sector and give banks more freedom to design their GML policies.
Two key changes have been suggested: extending the repayment period for jewellers to 270 days from the current 180 days, and allowing non-manufacturers to access GML for outsourced jewellery production.
These changes could provide jewellers with better cash flow management and expand access to raw gold financing.
TIGHTER NORMS ON EXPOSURES OF FOREIGN BANKS
The RBI has also proposed amendments to the Large Exposures Framework and intra-group exposure rules for foreign bank branches in India.
The changes clarify how exposures to head offices and subsidiaries are calculated, extend credit risk mitigation benefits, and align intra-group exposure computation with broader large exposure rules. Importantly, the intra-group exposure threshold will now be linked to Tier 1 capital instead of paid-up capital and reserves.
These proposals aim to bring more consistency and prudence in the way foreign banks operating in India manage risks linked to their parent entities.
WEEKLY CREDIT REPORTING TO BOOST DATA QUALITY
Another key draft direction focuses on strengthening credit information reporting. Currently, credit institutions report borrower data to credit bureaus every fortnight. The RBI has proposed moving to weekly reporting, which would make credit reports more current and reliable for lenders.
To reduce errors and improve traceability, credit institutions will also be required to capture the Central KYC (CKYC) number in consumer reports. This step is expected to enhance the accuracy of credit histories and speed up error correction.
The RBI has invited banks, industry players and other stakeholders to provide feedback on the draft proposals by October 20, 2025, through its ‘Connect 2 Regulate’ platform. After review, the central bank is expected to finalise the norms, which could come into force later this year.
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