India’s Reserve Bank just pulled the financial equivalent of taking the car keys away from a teenager. Starting July 1, 2026, banks will face dramatically tighter rules on how they lend to stock and commodity brokers, with proprietary trading, the practice of firms betting with their own capital, taking the biggest hit.
The RBI amended its Commercial Banks Credit Facilities Directions on February 13, 2026, imposing new restrictions that effectively ban banks from extending credit for brokers’ own securities purchases. The only carve-out: limited market-making activities.
What the new rules actually change
All loans to capital market intermediaries now require 100% collateralization. The RBI went further by imposing a 40% haircut on equity collateral: if a broker pledges shares worth 100 rupees, the bank will only lend 60 rupees against them.
Bank guarantees provided to these firms must also meet the full collateral requirement.
