Shares of capital market-linked companies fell sharply on Friday after Reserve Bank of India Governor Sanjay Malhotra indicated that the central bank intends to move ahead with implementing stricter lending norms for proprietary trading activities.
Shares of BSE declined as much as 5%, while Angel One fell around 3.5%. Shares of Multi Commodity Exchange of India (MCX) were also under pressure, declining about 4%.
The Nifty Capital Markets index was trading nearly 2% lower in afternoon trade, with BSE and MCX leading the losses.
1 June 2026
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RBI To Proceed With Rules
The selloff followed comments from the RBI governor that the central bank plans to proceed with the implementation of revised lending norms for proprietary traders and certain market intermediaries.
In March, the RBI had deferred the implementation of the framework until July 1, 2026, providing temporary relief to brokers and trading firms.
Until then, brokers have been allowed to continue using bank guarantees backed by 50% margin requirements.
However, the revised framework is expected to increase funding costs for proprietary trading firms by tightening access to bank credit and requiring higher collateral levels.
Impact On Brokers
Under the amended RBI (Commercial Banks – Credit Facilities) Directions, brokers will be required to provide full collateral against loans used for proprietary trading activities.
The framework also prohibits banks from financing the acquisition of securities for a broker's own account, except in limited market-making situations.
"Banks shall not provide finance to a CMI for acquisition of securities on its own account, including for proprietary trading or investments," the RBI circular states.
Most exposures will now need to be backed by 100% collateral, including a substantial cash component.
Market participants believe the changes could raise capital costs for trading firms and potentially affect profitability.
There are also concerns that higher funding costs for brokers may eventually be passed on to margin trading facility (MTF) customers through higher charges or stricter margin requirements.
Curbing Speculation
The policy forms part of a broader regulatory effort to curb excessive speculation in financial markets.
Authorities have already increased transaction taxes on single-stock and index derivatives and introduced several measures since late 2024 aimed at cooling activity in India's rapidly expanding derivatives market.
Regulators view the tightening as necessary to prevent leveraged trading losses from spilling over into household finances through unsecured borrowing and indirect financing channels.
The RBI's revised framework also seeks to close loopholes that allowed some short-term working capital loans to be diverted towards trading activities, despite banks traditionally not directly financing proprietary trading operations.
