SEBI to Examine Brokers’ Plea on RBI’s New Funding Norms

The Securities and Exchange Board of India (SEBI) has reportedly received representations from stockbrokers regarding new funding norms issued by the Reserve Bank of India (RBI). The rules require banks to tighten lending to proprietary traders under capital market exposure regulations. 

The revised framework is due to take effect from 1 April. Broker associations have sought SEBI’s intervention and requested a deferment. 

Dispute Over Collateral Requirement 

Reports suggest that in its communication to SEBI, the Association of NSE Members of India (ANMI) said the RBI’s October consultation paper did not mention raising bank guarantee collateral requirements to 100% from the current 50%. 

According to the association, the final guidelines impose tighter conditions than those outlined earlier. The National Stock Exchange brokers’ forum has also raised similar concerns. 

SEBI to Examine Representations 

Speaking at a portfolio managers’ event on Monday, SEBI Chair Tuhin Kanta Pandey said the regulator had reviewed the representation and would examine the issues raised. He noted that the RBI had earlier issued draft guidelines and sought stakeholder feedback. 

Pandey said there were “3 or 4 issues” involved and described the matter as one that falls within the RBI’s regulatory domain. 

RBI Maintains Position 

RBI Governor Sanjay Malhotra said the central bank would not provide further relaxation. He stated that the original draft norms had proposed a complete prohibition on such lending and that the final version had already been eased. 

Parallel Regulatory Actions 

Separately, SEBI said it plans a comprehensive review of the Portfolio Management Services (PMS) Regulations, 2020. The framework has not undergone a full review in 6 years, and a consultation paper is expected before the June board meeting. 

Pandey also confirmed that a general manager in SEBI’s corporate finance department had been suspended in connection with a vigilance matter. He said the decision was taken based on available evidence and that the issue would be examined further. 

Read More: SEBI Begins Comprehensive Review of PMS Regulations, Consultation Paper Expected in June! 

Conclusion  

Broker associations have sought regulatory reconsideration ahead of the rollout. SEBI said it will examine the issues raised in the representations. 

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