RBI Orders 100% Collateral, 50% Cash for Market Bank Guarantees From July 1
Updated
Updated · Bloomberg · Jun 30
RBI Orders 100% Collateral, 50% Cash for Market Bank Guarantees From July 1
2 articles · Updated · Bloomberg · Jun 30
Summary
July 1 marks a funding reset for Indian proprietary trading firms and stock brokers, as bank guarantees used for capital-market activity must now be fully collateralized with at least half in cash.
The Reserve Bank of India imposed the rule to cut lenders’ risk, but the tighter terms are expected to reduce leverage that many local trading firms use to finance positions.
Higher collateral demands are likely to raise funding costs and shrink firms’ capacity to execute trades, delivering what market participants describe as a body blow to prop-trading models.
The change signals a broader push toward tighter risk controls in India’s capital markets, even at the cost of near-term trading flexibility.
In its bid to de-risk banks, is India's central bank inadvertently crippling the liquidity of its own capital markets?
As India tightens its grip on trading, are its traders being pushed into a riskier global shadow market?
RBI’s 2026 Capital Market Lending Overhaul: New Collateral Rules, Leverage Caps, and the Future of Indian Brokerage
Overview
On July 1, 2026, the Reserve Bank of India (RBI) will implement new rules for credit facilities to capital market intermediaries, aiming to boost financial stability and risk management. Banks must now fully secure margin trading facilities (MTF) with collateral limited to cash, cash equivalents, and government securities, and at least half must be in cash. This ensures client leverage is supported by strong liquidity, reducing default risks during market swings. The RBI also requires banks to apply strict haircuts on securities used as collateral, further limiting leverage and strengthening the overall resilience of the financial system.