Reserve Bank of India, RBI, yesterday asked banks to provide fixed interest rate options to individual borrowers and directed the lenders to levy only reasonable penalty charges in case of default in EMI payments. The two decisions are expected to provide relief to the borrowers amid rising interest rates and most of the retail loans being on floating rates now. RBI has issued guidelines to reset EMIs based on floating-rate personal loans, including allowing borrowers to switch over to a fixed rate as per the bank board-approved policy.

In a statement, the banking regulator said that all existing borrowers shall be sent a communication, through appropriate channels, intimating the options available to them. RBI said that Banks and other lenders will have to implement personal loan instructions by the 31st of December, 2023.