Brokerage firms are preparing to make representations to the Reserve Bank of India (RBI) seeking clarifications and possible changes to the new capital market exposure norms, even as the industry braces for a structural reset in funding for proprietary trading operations from April 1, 2026.
The revised framework mandates that all bank lending to capital market intermediaries be fully backed by eligible collateral and continuously monitored. More significantly, banks will no longer be allowed to finance proprietary trading or brokers’ investment positions. Credit support for operational requirements, such as working capital, settlement mismatches, market-making, and margin trading undertaken by clients through stockbrokers, will continue to be permitted.
Proprietary Trading Impact
While brokers say the rules improve transparency and financial stability, firms with large proprietary books argue that the blanket restriction could raise funding costs and reduce trading intensity, at least in the near term, prompting them to approach the regulator with implementation-related concerns.
“The new RBI capital market exposure norms for banks are another step in that direction. By mandating 100 per cent collateral and higher capital backing for broker exposures, the framework is expected to meaningfully restrict proprietary trading activity. This is largely constructive for the broader market,” said Feroze Azeez, joint CEO of Anand Rathi Wealth.
Funding Cost Pressure
Higher capital commitments will increase the cost of funds for brokers, making highly leveraged proprietary positions less attractive and, in some cases, forcing firms to raise additional capital. In the short term, he said, the transition could lead to selective unwinding of positions, marginally lower liquidity and higher funding costs, even as the longer-term impact points to reduced volatility and stronger market resilience.
Collateral Haircut Norms
At the operating level, the norms introduce uniform collateral haircuts, 40 per cent on listed equities; 25 per cent on sovereign gold bonds, mutual funds and REITs/ETF units; and 15–40 per cent on debt mutual funds and debt instruments. Market participants said this could marginally reduce the funding value of pledged assets for some brokers but removes ambiguity around valuation and risk management.
Ajay Garg, director & CEO at SMC Global Securities, said: “The tightening of capital market exposure norms by the RBI marks a structural shift in how brokers, particularly those with significant proprietary trading operations, will access funding from April 1, 2026.”
“This can lead to a moderate reduction in leverage among brokerage firms. Proprietary desks that earlier relied on bank funding may either scale down trading activity or increasingly depend on internal capital and alternative funding sources. However, brokers largely focused on client-based activities are unlikely to see any meaningful impact on their core operations,” Garg said.
Margin Trading Clarity
One area where the rules offer clarity is margin trading. Earlier, banks lacked a clear regulatory framework for extending margin trading funding to brokers. The revised norms explicitly allow banks to provide funding for margin trading undertaken by clients through stockbrokers, a move seen as positive for client-facing businesses and lender comfort.
Ajay Kejriwal, executive director at Choice Broking, said: “The Reserve Bank of India’s recent guidelines are a prudent step toward reinforcing systemic stability. For the broader broking ecosystem, the impact remains largely contained. However, proprietary desk brokers may experience a marginal effect in terms of capital allocation, leverage calibration and treasury efficiency.”
Published on February 16, 2026
