New Delhi, Sep 30 || The Reserve Bank of India (RBI) issued new guidelines for small business loans, increasing the lending flexibility for banks, in adjusting the additional interest or spread charged over the loan term.
The RBI has also eased lending restrictions for businesses that depend on gold as a raw material.
"Banks are generally prohibited from lending for the purchase of gold or silver in any form, or lending against the security of primary gold or silver. However, a carve-out has been allowed for Scheduled Commercial Banks (SCBs) for granting working capital loans to jewellers," the statement said.
Regarding business loans, banks could previously revise the spread linked to a borrower’s credit risk only once every three years.
Under the new rule, banks may now reduce other spread components earlier than the three-year period to benefit borrowers. Additionally, borrowers will now have the option to switch to a fixed-rate loan at the time of reset.