RBI Eases Rules for Small Business and Gold-Linked Loans
The Reserve Bank of India (RBI) has relaxed norms for small business lending, allowing banks to adjust the spread charged for a borrower’s credit risk more frequently. Previously, banks could revise the spread only once in three years, but the regulator now permits reductions in other spread components earlier, benefiting borrowers. The RBI also said lenders must provide an option for borrowers to switch to fixed-rate loans at the time of reset.
In a separate move, the central bank widened the scope of lending against gold for businesses. While banks are barred from financing direct purchases of gold and silver, they can now extend working capital loans to any borrower that uses gold as a raw material, beyond just jewellers.
The RBI announced the changes late on Monday through a circular, saying the tweaks are aimed at giving lenders greater flexibility while offering relief to borrowers in sectors dependent on small business credit and gold-linked financing.
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