BSE, MCX Lead Capital Market Stocks Lower As RBI Reaffirms Prop Trading Lending Norms

Shares of capital market-linked companies declined sharply on Thursday after Reserve Bank of India (RBI) Governor Sanjay Malhotra said the central bank intends to proceed with revised rules governing bank credit to proprietary trading activities.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

The comments triggered selling across brokerage and exchange stocks, with investors assessing the potential impact of tighter funding norms on trading volumes and market intermediaries. Shares of BSE fell as much as 5%, while Angel One slipped over 2% during the session. Multi Commodity Exchange (MCX) also witnessed significant selling pressure.

The broader Nifty Capital Markets index was down nearly 2% in afternoon trade, with exchange operators and brokerage firms accounting for most of the decline.

July Deadline Back In Focus

The RBI had postponed the implementation of the revised framework in March, extending the deadline to July 1, 2026. The extension let brokers keep using bank guarantees backed by 50% margins, but only temporarily. 

With the July implementation date coming up, market folks are looking at the operational and funding effects of the new rules again. The updated RBI guidelines now make it harder for commercial banks to lend for proprietary trading activities. The framework requires most exposures to be supported by full collateral and limits financing for securities acquired on a broker’s own account.

The RBI circular states that banks shall not provide finance to a capital market intermediary for purchasing securities for proprietary trading or investment purposes, except in specific market-making activities permitted under the rules.

Impact On Brokers And Trading Firms

The revised norms are expected to increase capital requirements for proprietary trading operations and liquidity providers that rely on bank-backed funding arrangements.

While banks typically do not directly fund speculative trading positions, regulators have sought to prevent the use of short-term working capital facilities for market-related activities. The measures are intended to strengthen risk management practices and reduce leverage in certain parts of the capital markets ecosystem.

Industry participants have said higher margin requirements could increase operating costs for brokers and proprietary trading firms. Any rise in the cost of funding may also affect margin trading facilities extended to customers.

Part Of Broader Regulatory Measures

The lending framework forms part of a wider set of regulatory actions aimed at managing risks associated with leveraged market activity. Over the past year, authorities have introduced several measures affecting derivatives trading and speculative market participation.

The latest developments come as regulators continue efforts to strengthen safeguards around market financing and limit the transmission of trading-related risks into the broader financial system.

For investors, Thursday’s decline highlighted concerns that tighter funding conditions could influence profitability for certain brokerage businesses and trading-focused intermediaries once the revised RBI framework takes effect next month.