Currently - Banks lend to Brokers against 50% Bank Guarantee and 50% personal or corporate Gtee. This is ending and will now be 100% BG.
Any Bank issuing BG favoring exchanges will need 50% collateral of which 25% cash. this means Rs 25 must now be locked away in non-productive cash.
Higher Haircuts and Trading Restrictions
Banks must now apply for a mininum 40% haircut on equity shares accepted as collateral.
if a broker pledges Rs 100 worth of shares, the bank will only recognise Rs 60 toward their borrowing limit, thus forcing firms to pledge significantly more assets in order to maintain the same level of credit lines.
In terms of a broker’s proprietary trading, meaning its own bets on the market, RBI has issued a tighter norm. Exceptions will only be granted for essential activities such as market making or debt warehousing.
I am sure there will be ripple effect when shares are pledged by traders…
From what I understand, this RBI update is about how banks deal with brokers not about traders.
It doesn’t change our margins, haircuts, or collateral rules. Those are set by SEBI and the exchanges, and they remain the same.
So for us as traders, nothing changes.
The only place this might matter is for very small brokers who depend heavily on bank funding. They could feel some pressure.
They might tighten internal policies or adjust MTF rates.
For regular, well-capitalised brokers, it shouldn’t make any difference.
No changes for clients at Zerodha, the norms are between brokers and banks. Small brokers maybe effected,Zerodha is well equipped with cash so no need to worry.
@siva SEBI and RBI always thinking about retailers - we are a newborn baby in front of regulator- please save us in front of saver
Please tell us RBI to look a national loss of rupee instead of retailer loss -
even in midnight also they have meeting about how to save retail - so clearly we know they are very busy to protect retail - in this gap FII escaping out of india -
@nithintweeted the following insights on this topic, along with a detailed substack post:
We’ve been trying to understand RBI’s new lending rules for brokers. Spoke to a few industry folks to figure out what’s actually changing. TL;DR: quite a bit. Here’s my understanding—things are still evolving
Firstly, nothing changes for any of our customers. We have 0 external financing, and are a self-clearing member, so our charges for clients will also remain unaffected.
The big change: Banks can no longer fund proprietary trading. This was never actually allowed, but banks had found workarounds. Here’s how it worked—prop desks would deposit an FD of Rs 50 crore, get a bank guarantee for Rs 100 crore, and place it with the clearing corporation for margins to trade with 2x leverage. That’s now completely shut down.
Another change: Professional Clearing Members (PCMs) enjoyed lower collateral requirements—they only needed 25% collateral to get a Rs 100 bank guarantee, while other intermediaries had to put up 50%. That preferential treatment is now gone. PCMs also need 50% collateral going forward. This likely means higher costs for brokers who rely on PCMs for clearing. Doesn’t impact us at Zerodha since we self-clear across all segments.
Costs are rising across the board for brokerages, and this may or may not get passed to you, the customer.
Now, because of this circular, intraday funding will get more expensive with the new 100% collateral requirement (up from 50%). MTF financing will also likely cost more since banks now need 100% collateral with at least 50% as cash or cash equivalents. All of this kicks in from April 1, 2026.