Will BSE, Angel One, Groww Survive the Derivative Crunch? Capital Markets Under Pressure As RBI Tightens New Lending Norms

BSE And Capital Market Shares Drop Amid RBI Tightening

The stock prices of BSE and other capital market companies experienced a significant decline, ranging from 2% to 10%, on February 16 after the Reserve Bank of India (RBI) implemented stricter rules for bank loans to brokers and market intermediaries. The RBI published new regulations on February 13, establishing more stringent standards for bank guarantee collateral and prohibiting banks from extending loans for proprietary trading activities. Industry experts believe this decision will have a major impact on both market liquidity and leverage.

Jefferies estimated that BSE could see a 10% decrease in earnings due to the RBI regulations, highlighting the central bank’s influence on capital market activities and risk management practices.

RBI Regulations Impact on Nifty Capital Markets and Brokers (16 February, 2026)

• Nifty Capital Markets: Trading nearly 2% lower

• Angel One: Down 4%

• Groww: Down 3.5%

• BSE: 2% to 10%

RBI’s Revised Lending Norms for Brokers

Under the amended RBI (Commercial Banks – Credit Facilities) Directions:

• Brokers will be required to provide full collateral against loans for proprietary trading.

• Bank funding for acquisition of securities on a broker’s own account is barred, except for limited market-making activities.

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• Most exposures must be backed by 100% collateral, including a significant cash component.

Circular states, “Banks shall not provide finance to a CMI for acquisition of securities on its own account, including for proprietary trading or investments.”

RBI Rules Shake Up Liquidity and Proprietary Trading

The Reserve Bank of India aims to protect the banking system, but some industry experts believe that the “blanket approach” will restrict liquidity. The market’s hidden champions, known as proprietary and arbitrage desks, conduct cash–futures arbitrage, options market making, and index arbitrage-executing low-margin, high-volume transactions to maintain tight spreads and fair prices.

The new collateral regulations increase operational expenses for proprietary trading desks, potentially impeding their performance. Proprietary trading generates 50% of the equity options premium turnover. Investors are closely observing whether markets can continue operating smoothly under stricter RBI regulations or face potential disruptions.

Effect on Derivative Volumes and Market Participants

• The revised RBI norms will take effect from April 1, 2026.
• Combined with the recently hiked transaction tax on equity futures and options, derivative trading volumes are expected to decline.
• The Indian government and financial regulators have taken multiple measures to cool the derivative trading market, where retail investors have faced losses.
• Angel One may need to reassess funding for its margin trading facility, according to JM Financial analysts.
• Groww might have to raise additional funds from the market to comply with the new rules.

(With Inputs from Reuters)

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