The Reserve Bank of India (RBI) has released draft directions on Interest Rates on Loans and Advances. Some of the important points are as follows:
A bank shall explicitly put a ceiling on the Annual Percentage Rate (APR) inclusive of interest rate and all other charges / fees on microfinance loans and small value loans while ensuring that these are not usurious. Small value loan for the purpose of these directions shall mean a personal loan sanctioned to an individual where the principal amount does not exceed ₹50,000.
The total interest and all other charges / fees shall not exceed the principal amount for short-term agricultural loans and advances to small and marginal farmers.
The internal benchmark for a commercial bank, RRB, UCB in Tier 3 & 4, or RCB having total deposits of more than ₹1000 crore shall be based on the marginal cost of funds, and the interest rate referencing this benchmark shall be the marginal cost based lending rate (MCLR).
A commercial bank, RRB, UCB in Tier 3 & 4, or RCB having total deposits of more than ₹1000 crore shall publish the internal benchmark on the first calendar day of each month, which shall be the applicable benchmark for all loans and advances which are linked to this benchmark and sanctioned during that month.
Click here to download RBI Circular
