The Reserve Bank of India (RBI) has enforced new personal loan regulations in 2025 that target transparency enhancement, borrower safety, and responsible lending practices. The rules that apply to banks, non-banking financial companies (NBFCs), and digital lenders, are expected to stop taking on more debt than is necessary while also providing clearer terms of the loans to consumers.
More Stringent KYC and Credit Checks
Lenders are now compelled to do more stringent Know Your Customer, KYC, verification, that encompasses linking the Permanent Account Number, PAN, to the Aadhaar number and validating the income proofs, per the new directives. Borrowers with credit ratings lesser than 650 will likely be subjected to stricter qualifying criteria or charged higher interest rates. Additionally, all the loan contracts are required to be electronically transmitted to the borrower prior to disbursement.
Loan-to-Income Ratio Limit of 50%
In a move aimed at preventing borrowers from taking debts beyond their repayment capacity, the RBI has limited the Loan-to-Income (LTI) ratio at 50%. This means that your total monthly loan repayments should not account for more than half of your monthly income. Lenders are required to check this ratio before giving approval for any personal loan, especially for unsecured credit.
Digital Lending Regulations
All digital loan applications must be approved by the RBI and must also report their disbursal to credit bureaus. Borrowers’ consent is required before the lender accesses such personal data. Loan conditions, interest rates, and repayment periods must be displayed in the local languages clearly.
Prepayment and Foreclosure Clarity
Whereas before, personal loans could be prepaid by borrowers but with some hidden costs, now the RBI ruling states that prepayment penalties must be disclosed at the very beginning and every borrower is entitled to have floating-rate loans without foreclosure costs. Hence, this gives the borrowers the opportunity to pay off the loan ahead of schedule and save on interest charges.
Updated Personal Loan Charges in 2025
Here’s a snapshot of typical personal loan costs across banks and NBFCs:
| Fee Type | Typical Range (₹) |
|---|---|
| Processing Fee | 1% – 3% of loan amount |
| Prepayment Charges | 0% – 2% (fixed rate loans) |
| Late Payment Penalty | ₹500 – ₹1,200 per EMI |
| Loan Cancellation Fee | ₹1,000 – ₹3,000 |
| CIBIL Report Access Fee | ₹50 – ₹100 |
Impact on Borrowers
These changes make borrowing to be a safer and more certain process. The consumers can now have peace of mind knowing that they can ask for the best offer available and that they won’t inadvertently fall into financing traps with the series of measures put in place such as the capped LTI ratios, transparent pricing, and digital safeguards. The lenders too are required