Reserve Bank of India Tightens Financing Norms for Brokers: Will Stockbrokers Feel the Pressure?

The Reserve Bank of India’s amendment, which will come into effect on April 1, 2026, heralds sweeping changes to the financing structures, collateral standards and exposure rules across the capital markets ecosystem – a move that could reshape the operational landscape for stockbrokers.A key change under the amendment is the shift to fully secured financing for brokers. Going forward, only 100% secured financing will be allowed, with limited exceptions such as intraday settlement timing facilities. Earlier, bank guarantees of, say, Rs 100 could be structured where Rs 50 was backed by fixed deposits and the remaining Rs 50 was backed by unsecured instruments such as personal or corporate guarantees. The revised framework removes this flexibility.

The amendment also introduces stricter rules for bank guarantees issued in favor of exchanges or clearing houses. At least 50% collateral is now required, of which at least 25% in cash. In addition, shares accepted as collateral will be subject to a minimum haircut of 40%, which means a tightening of collateral valuation standards.

Another important change concerns proprietary trading. Banks will no longer be allowed to provide financing for trading activities, with exceptions limited to areas such as market making and certain debt storage functions. In addition, all exposures will now be classified as capital market exposures, meaning that banks’ general limits for such exposures will apply, potentially impacting credit appetite.

The framework also introduces continuous monitoring of collateral and margin call provisions. Collateral coverage will need to be maintained on an ongoing basis, and facility agreements should include explicit clauses for margin calls in the event of shortfalls.

Overall, the amendment is expected to reduce leverage across the system and increase capital constraints for brokers. The revised structure is likely to increase bank guarantee costs, while promoter guarantees alone will no longer suffice as adequate support.

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