The RBI has issued a new circular on how banks should go about resetting interest rates on floating rate loans. Interest rates have been rising throughout this year, and customers haven’t been too happy with the way banks impose changes on their loans.

But the new RBI guidelines promise to increase transparency and clarity. For one, borrowers will now be given the option to shift from a floating to a fixed rate of interest. Secondly, banks have to offer them the choice of whether they want to raise the EMI or extend the loan tenure, or do a combination of both.

What prompted the RBI to come up with these new rules? How will they benefit borrowers? And will it enable more equitable information-sharing between lenders and borrowers? 

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