Reserve Bank of India Won’t Revisit Broker Funding Norms

The Reserve Bank of India has clarified that it is not considering any revision to its recently announced norms governing bank financing to brokers and traders. 

Governor Sanjay Malhotra stated that the framework was introduced after due consultation with stakeholders and will come into effect from April 1. The new regulations require banks to secure 100% collateral for funding brokers, cap total exposure at 40% of tier-1 capital, and prohibit funding for proprietary trading.

Given that proprietary trading accounted for nearly 30% of participation in cash and futures markets and about 50% in equity options as of December 2025, the measures are expected to impact overall trading volumes. 

However, the RBI has maintained that the move strengthens financial discipline and risk management.

No Systemic Risk from IDFC First Bank Fraud

Addressing concerns around the ₹590-crore suspected fraud at a Chandigarh branch of IDFC First Bank, the Governor ruled out any systemic risk. He confirmed that the central bank is closely monitoring developments but emphasised that the issue does not pose broader stability concerns. The bank’s shares, however, declined sharply on the BSE following the developments.

Inflation, Capital Adequacy & Rate Outlook

On inflation, Malhotra said changes in the Consumer Price Index base year and methodology would not automatically warrant adjustments to India’s inflation-targeting framework of 4 ± 2%. Although revisions to methodology and weightage, particularly a reduction in food’s share, are significant, they are not substantial enough to require a policy shift.

Regarding banking sector strength, he highlighted that lenders remain well-capitalised, with an average capital adequacy ratio of around 17%, well above the regulatory requirement of 11.5%. Even without additional capital infusion, banks can sustain 10–11% annual credit growth over the next five years.

Since February 2025, the RBI has cut the repo rate by 125 basis points to 5.25% to support growth, though the Monetary Policy Committee recently maintained a neutral stance amid global uncertainties.

Also Read: Delhi High Court Dismisses Challenge to SEBI's Green Light for NSE IPO!

Conclusion

The RBI’s message underscores regulatory stability and financial resilience. By standing firm on broker funding norms, dismissing systemic risk fears, and reaffirming the strength of banks and the inflation framework, the central bank aims to maintain confidence in India’s financial system while balancing growth and prudence.

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