MSME Loans: Interest Rates to Reset Every 3 Months
RBI has directed banks to link MSME loans with external benchmarks; new rule to benefit both new and existing borrowers
Dec 15, 2025 - To ensure cheaper and easier credit for Micro, Small, and Medium Enterprise (MSMEs) businesses, the Reserve Bank of India (RBI) has issued new directions to banks. Banks have been advised to link loans given to MSMEs to an external benchmark. Under this system, loan interest rates will be reset every three months, a move by RBI aiming for better monetary policy transmission.
This means that any change in the RBI’s Repo Rate will be transmitted more effectively to MSME borrowers. Additionally, existing borrowers who have already taken loans under fixed-rate or other older systems will also get an opportunity to shift to the new arrangement. Banks will provide a switch-over facility with mutual consent. As a result, even old loans will be able to benefit from lower interest rates.
Source: Media Reports
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