Overview
- Malhotra confirmed there is no rethink of the newly issued rules, leaving the April 1 implementation date unchanged after industry requests for a review.
- The rules require banks to extend credit to capital market intermediaries only against 100% eligible collateral and prohibit funding for brokers’ own-account trading or investments.
- Limited carve-outs allow financing for market making and debt warehousing, and banks may issue guarantees for proprietary trades only if fully secured with cash, cash equivalents, or government securities, with at least half in cash.
- Brokerages warn of pressure on margins and volumes after sharp share price declines when the rules were announced, while analysts say curbs on bank-funded prop activity could thin options liquidity.
- Separately, the RBI has sent recommendations on the inflation-targeting framework to the government, and Malhotra indicated the revamped CPI series alone does not warrant changing the 4% target within the 2–6% band.