EMI Empowerment: Upcoming Guidelines to Reshape Home Loan Experience.


In a significant move aimed at safeguarding borrowers’ interests, the Reserve Bank of India (RBI) is gearing up to roll out comprehensive guidelines for banks and housing finance companies (HFCs) pertaining to the adjustment of tenor and equated monthly instalments (EMIs) in home loans. The decision follows the identification of multiple cases where lenders extended the floating rate tenor without proper authorization or communication, leading to undue elongation.

Governor Shaktikanta Das emphasized that lenders must factor in crucial aspects such as borrower age and payment capability while contemplating changes to loan terms. Governor Das highlighted the importance of avoiding unwarranted elongation, which could potentially mask underlying financial strain in certain loans. Consequently, any tenor extension should be designated for a specific duration to ensure transparency and clarity.


However, the RBI clarified that the upcoming guidelines will not set a predefined loan term, allowing lenders and their boards to exercise their commercial acumen in assessment.

Governor Das pointed out, “Our intention is to provide general guidelines to facilitate a fair process.” The announcement was made within the context of the development and regulatory policies articulated alongside the monetary policy update.

In a broader context, the central bank envisions establishing a comprehensive conduct framework applicable to all regulated entities under its oversight.

“The framework envisions clear and effective communication between lenders and borrowers for tenor and/or EMI adjustments. It will offer alternatives like transitioning to fixed rate loans or opting for loan foreclosure, coupled with transparent disclosure of relevant charges. Additionally, lenders will be required to ensure proper conveyance of essential information to borrowers,” explained the Reserve Bank of India (RBI).

Deputy Governor Rajeshwar Rao, responsible for the regulation and enforcement department, revealed that the central bank had engaged in discussions with bank CEOs to address these concerns and outline the anticipated actions.

Banking professionals highlighted the RBI’s objective of achieving a harmonious equilibrium between augmenting loan tenors and EMIs for borrowers. When interest rates experience an upswing, banks are presented with the choice of either adjusting EMIs or tenor.

The impending guidelines are poised to introduce a more structured and transparent approach, promoting fairness and clarity for borrowers in the realm of home loans. As RBI strives to enhance the lending landscape, borrowers can anticipate a more informed and balanced loan experience.

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