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ARTICLE · 18 MARCH 2025

Decoding RBI's FAQs On Reset Of Floating Interest Rate On EMI Based Personal Loans

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As part of its broader, long-standing effort to ensure fairness and borrower protection in India's credit ecosystem, on 10 January 2025, the Reserve Bank of India released responses to frequently asked questions pertaining to the RBI circular ...

IndiaFinance and Banking
Smita Jha
Smita Jha
Ganesh Bhaskar Lata
Ganesh Bhaskar Lata
Nayana JM
Nayana JM
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I. Introduction

As part of its broader, long-standing effort to ensure fairness and borrower protection in India's credit ecosystem, on 10 January 2025, the Reserve Bank of India (RBI) released responses to frequently asked questions (FAQs) pertaining to the RBI circular - Reset of Floating Interest Rate on Equated Monthly Instalments (EMI) based Personal Loans dated 18 August 2023 (RBI Circular).

The RBI Circular was introduced to ensure that borrowers were adequately informed in cases where interest rates on equated instalments based personal loans are reset or otherwise increased. These floating interest rates, which fluctuate based on changes in an underlying reference benchmark, have been a key feature of the personal loan and housing finance segments. While floating rates offer borrowers the potential benefit of reduced rates during periods of monetary easing, they also expose them to increased repayment obligations during periods of rate hikes. To this

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