Capital market stocks such as BSE, Groww, Angel One and others shed up to 10% today after the Reserve Bank of India (RBI) tightened norms for bank lending to stock brokers and other market intermediaries, effective April 1, 2026.

At 01:30 PM, BSE and Angel One were amongst the top losers, while Billionbrains Garage Ventures (Groww) was also trading in the red.

The central bank tightened rules for loans taken by firms that undertake proprietary trading in shares and commodities and offer leverage to clients, the latest measure aimed at reducing speculative market activity in the country.

All credit facilities to securities firms will have to be backed by collateral, while lending for trading on their own account or investments by brokers will be prohibited.

These stricter measures would raise the cost of raising capital for proprietary trading firms and squeeze profits. 

Here are the changes that concerned investors:

Proprietary Trading in Shares

The RBI said that banks cannot fund proprietary trading by brokers. Proprietary trading refers to firms trading in shares, commodities or derivatives using their own capital to earn profits.

While Indian banks traditionally do not directly finance proprietary trading, the directive closes a loophole that allowed short-term working capital loans given by banks to be diverted for trading by brokers.

The latest step comes just days after India sharply raised transaction tax on trading of single-stock and index derivatives in a bid to reduce speculative trading. Combined with the central bank’s new rules, market participants fear that the rules will hurt volumes.

Guarantees Extended To Brokers

The RBI has also asked banks to demand that guarantees extended by them on behalf of a broker for proprietary trades to be fully secured, with 50% of collateral being in cash and rest as cash equivalents and government securities. The new rule will narrow the type of securities trading firms can offer as collateral to banks.

Margin Trading Facility (MTF)

The central bank also tightened lending rules for margin trading facility under which stock brokers offer leverage to their clients. Loans given by banks for the product will have to be fully secured by cash and other liquid securities. Stocks offered as collateral by brokers will be considered at a 40% valuation discount.

Margin trading facility has grown rapidly into a more than 1 trillion rupees ($11 billion) market for stock brokers, where clients can get leverage of upto five times of their capital.