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  • Reserve Bank of India
February 27, 2026 location Mumbai

Credit Alert: Impact of recent RBI Directions on broking entities


A credit alert conveys the opinion of Crisil Ratings on a sharp and specific development.

 

The Reserve Bank of India (RBI) released the Commercial Banks – Credit Facilities Amendment Directions on February 13, 2026, introducing a new chapter titled ‘Credit Facilities to Capital Market Intermediaries (CMIs1)’.

This amendment will be effective from April 1, 2026. However, banks have the option to adopt these even earlier.

The amendment provides directions to banks on permissible and prohibited credit facilities to CMIs. It also defines the extent and form of collateral that banks are required to maintain while providing any credit facility to CMIs.

Our initial assessment is that the changes introduced will have direct implications for CMIs engaged predominantly in proprietary trading. However, for CMIs operating as brokers (offering service to clients), the impact is limited.

The key changes introduced in the amendment and their likely implications on the business and operations of CMIs are as follows:

 

 

Type of business

Change(s) as per the amendment

Expected implications

CMIs engaged in proprietary trading activities i.e. acquisition of securities on their own accounts

Firstly, the guarantees provided by banks in favour of exchanges or clearing houses on behalf of CMIs for proprietary trading activities will be subject to collateral coverage of 100% (as against 50% currently) and should be only in the form of cash, cash equivalent or government securities. Further, 50% should be in cash.

Secondly, banks will not provide finance to a CMI for acquisition of securities on its own account, including for proprietary trading or for investments.

Substantial impact on volumes envisaged due to more stringent collateral requirements for guarantees.

As per current practice, banks offer a limit of 2 times the collateral value to CMIs through guarantee facility.

Now with a requirement of 100% collateral coverage (with half of that to be in the form of cash), the limit available with CMIs (for proprietary trading activities) will reduce to half, thereby reducing the level of trading capacity for these players.

In terms of bar on banks providing finance, the impact will be negligible as most entities have anyway not been using bank finance for proprietary trading.

 

 

 

CMIs engaged in broking, i.e., offering service to clients

Specifics on the form of the collateral for guarantees provided by banks on behalf of brokers or professional clearing members and in favour of exchanges or clearing houses have been introduced.

The minimum collateral requirement remains unchanged at 50%. Out of this, 25% shall now be in cash.

No impact envisaged given that these directions are more clarificatory in nature.

Not expected to have any implication given that the current practice followed is already broadly in line with the amendment directions.

 

 

 

CMIs availing intraday limits for various activities

Banks to extend credit facilities to CMIs on a fully secured basis (i.e., with 100% collateral) for intraday limits. This is as against the current practice of banks providing intraday credit lines to CMIs at 50% collateral whereby, effectively, CMIs are getting leverage of 2 times. CMIs (particularly stockbrokers) use these intraday limits on daily basis for various activities and ensure limits are settled by the end of day.

Impact will largely depend upon end utilisation of this facility by CMIs. If the facility is utilised for meeting shortfall due to settlement timing difference in centrally cleared trades placed on behalf of clients, minimum collateral requirement will remain at 50% and hence no material impact is expected. However, in case utilisation is towards proprietary trading activities, it will now not be permitted, which will further restrict the trading capacity of such CMIs. Availability of intraday limits for any activities, other than the abovementioned, will require 100% collateral.

 

 

 

CMIs offering margin trading facility (MTF) to clients

Bank financing to CMIs for MTF to be fully secured by collateral in the form of cash, cash equivalent, or government securities only. Further, 50% shall now be in cash.

No material impact envisaged as CMIs are currently also not using credit facilities from banks for onward lending under MTF. This is primarily due to the Securities and Exchange Board of India (SEBI) guidelines that barred CMIs from raising any funds through repledging of shares pledged by their clients to avail MTF facility.

 

 

The changes will require CMIs (particularly entities involved significantly in proprietary trading) to buffer up their liquiditycushions. Proprietary traders may also seek alternative financing avenues in due course as they evaluate the economicsof providing 100% collateral on bank guarantees. During the transition period, there could be a substantial reduction intrading volume for such entities.


Nevertheless, given that the changes highlighted in the amendment are applicable by April 1, 2026, it does give sometime to CMIs to attempt realignment of their business operations to minimize or manage the impact of these measures.We will continue to engage with all our rated CMIs and take the rating actions, if necessary, after assessing their impacton aspects like business growth, cost structure and profitability of the companies.

1 Refers to regulated entities undertaking trade execution and market infrastructure services in capital markets, including broking, clearing, custody, market making or other incidental services