- RBI extends deadline for regulations
- Capital Market Rules postponed by 3 months
- RBI decision positive for the market?
Stock Market News: In the wake of volatility in the Indian stock market due to the conflict between the US and Iran, the Reserve Bank of India has extended the implementation date of new rules related to capital market investments from April 1 to July 1, 2026. The main benefit of this decision will be the stock brokers; Because they will no longer need to immediately deposit additional cash collateral for bank guarantees. Earlier, the RBI had mandated that banks increase the cash collateral required in lieu of their bank guarantees from 50 percent to 100 percent. Now, however, until July 1, brokers can continue to use bank guarantees at a margin of 50 percent as per the existing rules.
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Brokers have been opposing this rule. They argue that the rule will trap their ‘working capital’ and reduce liquidity in the market. However, the RBI has clarified that only the date of implementation of the new rules has been postponed; But the proposed measures themselves have not been withdrawn. RBI has also tightened the norms related to loans given under ‘margin trading facility’. It is now mandatory to maintain 50 percent cash margin for such loans. This means that if a trader wants to trade using borrowed funds, he has to deposit half of the required amount in cash in advance.
Rules relating to loans to capital market intermediaries have also been simplified and clarified; Which allows raising funds by pledging 100 percent cash or cash-equivalent assets. In addition, the RBI has removed restrictions previously imposed on ‘market makers’. These restrictions were related to transactions in which market makers used to finance the same securities that they themselves traded.
What do the experts say?
While the RBI’s decision to postpone the implementation date of the new norms was seen as a welcome relief by market watchers, they are not entirely satisfied with the decision. Deven Choksi, Managing Director of DR Choksi Finserv, noted that the Iran-related conflict has already created a lot of volatility in the markets. Against this backdrop, RBI’s decision to postpone the implementation of these norms is a positive step. This will provide relief to traders and other market participants and help bring stability to the market.
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Roop Bhutra, CEO, Investment Services, Anand Rathi Shares & Stock Brokers, observed that while the extension of the deadline is a welcome step, it is important to note that there has been no change in the original proposals. Key issues on which the broking industry had sought relief—such as rules on intra-day funding—have remained unchanged.
Although a three-month extension has been granted, the challenges are likely to intensify when the rules come into effect on July 1. As per the new norms, the per-person limit for securities lending has been fixed at Rs 10 lakh, while the limit for IPO financing has been fixed at Rs 25 lakh. These new regulations could increase the cost of capital for proprietary trading companies and put pressure on their profit margins. Although Indian banks do not directly finance proprietary trading, these rules effectively close a loophole, whereby brokers used to use short-term working capital loans provided by banks for their trading activities.
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