The Reserve Bank of India (RBI) plays a critical role in ensuring financial stability, promoting secure banking practices, and adapting the financial system to evolving economic and technological realities. In 2025, the RBI introduced a comprehensive set of regulatory updates aimed at strengthening the oversight of financial institutions, supporting responsible lending practices, modernising currency management, and fostering innovation through digital currency adoption.
These changes reflect the central bank’s efforts to respond to the growth of digital lending platforms, address consumer protection concerns, streamline Know Your Customer (KYC) procedures, and align Indian regulations with global financial standards. This article provides a detailed and structured summary of the RBI’s major reforms introduced in 2025.
Standardisation of Digital Lending Framework
Digital lending has expanded significantly in India, prompting the RBI to issue updated and unified guidelines in 2025. These reforms are intended to protect borrowers, ensure institutional accountability, and regulate the role of third-party lending platforms.
Under the revised framework, financial institutions must now clearly define their relationships with Lending Service Providers (LSPs) and ensure that Digital Lending Apps (DLAs) used for disbursing loans are formally registered and compliant.
Implementation Schedule:
- June 15, 2025: Deadline for digital app registration under regulated entities.
- November 1, 2025: Deadline for reporting structures involving multiple lenders and LSPs.
This regulatory shift aims to establish transparency in digital transactions and ensure data protection for borrowers.
Revised Rules for Gold-Backed Loans
Gold loans are a popular financial product in India, especially in semi-urban and rural regions. To ensure proper usage and reduce systemic risks, the RBI introduced specific restrictions in 2025:
- Loans can only be provided against gold jewellery and coins issued by recognised institutions. Gold bars and bullion are no longer permitted as collateral.
- The Loan-to-Value (LTV) ratio has been capped at 75% for loans used for personal consumption.
- Lenders are responsible for validating the end-use of the loan amount, supported by documentation.
- Renewals and top-up loans are allowed only for performing (non-stressed) accounts.
New Criteria for Personal Loan Eligibility
RBI’s 2025 update also includes a focus on curbing over-borrowing. Lenders are now required to ensure that the borrower’s total Equated Monthly Instalments (EMIs) across all loans do not exceed 50% of their net monthly income.
This rule enforces financial discipline and reduces the likelihood of defaults. Institutions must evaluate each applicant’s debt-to-income ratio, credit history, and repayment behaviour before disbursing personal loans.
Currency Management Modernisation
To enhance efficiency and reduce operational costs, the RBI revised its currency printing and circulation strategies:
- ₹2, ₹5, and ₹2000 notes have been discontinued from printing.
- The ₹500 note has become the most circulated, accounting for approximately 40.9% of the total volume of currency.
- Smaller coins such as ₹1, ₹2, and ₹5 now make up over 80% of coin circulation.
A significant part of this reform includes the expansion of the Sa-Mudra Project, which automates currency sorting and distribution, and recycles old notes into eco-friendly products for industrial use.
Adoption of Expected Credit Loss (ECL) Framework
In 2025, the RBI directed banks and major NBFCs to move from the traditional incurred loss model to the Expected Credit Loss (ECL) approach. This new model requires lenders to anticipate and provision for potential credit defaults in advance.
Key Advantages:
- Encourages early detection of risk through future-oriented models.
- Aligns Indian banking practices with international accounting standards.
- Enhances the transparency of financial reporting in loan books.
This shift improves the overall resilience of financial institutions in managing credit risks.
Update to the Economic Capital Framework (ECF)
The RBI revised its Economic Capital Framework in May 2025 to strengthen its risk-bearing capacity. The updated structure ensures that the central bank maintains adequate reserves to handle financial uncertainties while still being able to transfer surplus funds to the government.
This move supports fiscal flexibility and provides a more reliable structure for the management of the RBI’s contingency reserves.
Regulation of NBFC Lending Rates
To ensure that the benefits of monetary policy are uniformly transmitted, the RBI has proposed standardizing the way NBFCs determine interest rates. NBFCs may be required to link their lending rates to external benchmarks, similar to banks.
This regulatory alignment is expected to increase transparency in loan pricing and ensure borrowers receive timely relief when policy rates are adjusted.
Simplified KYC Requirements and Extension of Compliance Period
In an effort to support financial inclusion, especially for low-risk customers, the RBI has simplified the KYC process. Customers availing basic banking services or receiving government benefits can now comply with minimum documentation requirements.
Additionally, the RBI has extended the deadline for customers to complete their periodic KYC updates. The new deadline is June 30, 2026, and institutions are permitted to use business correspondents to collect and update KYC documents, especially in rural areas.
Expansion and Integration of Digital Rupee (e₹)
The RBI’s digital currency project has progressed significantly in 2025. The digital rupee (e₹) has been expanded to both wholesale and retail markets, with new features and integration points.
New Features Introduced:
- Offline transaction support, enabling use in low-connectivity areas.
- UPI interoperability allows seamless movement between digital rupee wallets and traditional digital payments platforms.
- Programmable payments, enabling usage-specific fund transfers such as welfare disbursements or subsidy-linked purchases.
These advancements aim to reduce reliance on physical currency and promote secure, traceable financial transactions.
Increase in ATM Withdrawal Charges
Effective from May 2025, the RBI has revised the ATM withdrawal fee structure. The number of free transactions remains unchanged, but the charge per additional withdrawal has been raised.
Updated ATM Charges Table:
| Area Type | Free Monthly Transactions | Fee After Free Limit |
|---|---|---|
| Metro Cities | 3 | ₹23 per transaction |
| Non-Metro Cities | 5 | ₹23 per transaction |
Summary: Key RBI Reforms Implemented in 2025
The following list provides a consolidated view of the major RBI reforms for the year 2025:
- Unified digital lending rules with mandatory app registration and reporting timelines.
- Restriction of gold loan collateral to jewellery and approved coins, with a 75% LTV cap.
- EMI cap set at 50% of the borrower’s income for personal loan approvals.
- Shift to the ECL model for proactive credit risk provisioning.
- Economic Capital Framework revised to maintain financial resilience.
- Proposal to align NBFC interest rates with external benchmarks.
- Simplified KYC processes with an extended compliance deadline to June 2026.
- Continued rollout of the digital rupee with offline and programmable features.
- Increase in ATM withdrawal charges beyond free limits.