Brokerage Stocks Tumble as RBI Tightens Broker Funding Norms

Mumbai: Shares of top listed brokerages fell upto 5 per cent on Monday after the Reserve Bank of India (RBI) tightened norms for bank lending to stock brokers and other capital market intermediaries.

Groww (-1.76 per cent), Angel One(-4.38 per cent), Geojit Financial Services(-3.14 per cent) and Religare Enterprises(-5.34 percent) were the top losers while others like Motilal Oswal, Nuvama, JM Financial fell less while ICICI Bank owner of ICICI Securities too fell by 0.29 per cent.

Under the 'Commercial Banks - Credit Facilities Amendment Directions, 2026' guidelines effective April 1, all credit extended to capital market intermediaries must be fully collateralized. This includes brokers, clearing members and other securities market participants. Lending for proprietary trading will be barred, and bank guarantees for such trades must be backed by at least 50 per cent cash collateral. The tighter norms along with the recent hike in Securities Transaction Tax (STT) could reduce trading volumes, given that proprietary firms account for a significant share of equity options and cash market turnover fear experts.

The norms state that collateral for such credit can include cash, government or eligible securities, immovable property and other approved financial assets, but partial unsecured guarantees or promoter only guarantees will no longer suffice.

“Brokers with proprietary desks may face some challenges, particularly in intraday funding while brokers who only work for their clients won’t have an impact of collateral based lending,” said Ajay Kejriwal, executive director, Choice International.

Brokers with proprietary desks, do their own trading (like Jane Street) and do not have any clients. “However, there are brokers who have clients as well as do their own proprietary trading, it is to be seen how RBI new norms apply to such brokers who have a certain percentage of proprietary business,” Kejriwal said.

Bank guarantees issued in favour of exchanges or clearing houses must be backed by at least 50 percent collateral, of which 25 percent must be in cash, and equity shares accepted as collateral will attract a minimum 40 percent haircut for prudential valuation.

According to a JM Financial report, Angel One would need to "immediately relook" its funding for the margin trading facility, while Groww may need to raise funds from the market.

Jefferies pegs BSE as the most affected by the new regulations on proprietary trading, which could result in a 10 per cent earnings impact on the exchange operator.

Brokerage Change on Monday(%)

Groww -1.76

Angel One -4.38

Motilal Oswal -0.19

Nuvama Wealth

Management -0.86

Religare Enterprises -5.18

JM Financial -0.29

Emkay Global -5.34

Geojit Financial Services -3.14

ICICI Bank(owns ICICI

Securities) -0.29

Source: BSE