Brokers seek six-month pause on RBI curbs on bank lending, document shows

An Indian brokers' body has sought a six-month pause on rules ​that will tighten bank lending to stock ​brokers and other market intermediaries from April ‌1, according to a document reviewed by Reuters on Thursday.

The Reserve Bank of India tightened the norms last week, including raising collateral for bank guarantees and banning lending for proprietary trading by brokers.

The brokers' body, The Association of NSE Members of India (ANMI), has written to the markets regulator, seeking intervention.

The new rules would restrict access to ‌bank financing for proprietary trading positions, reduce liquidity, raise trading costs and are likely to discourage foreign portfolio investors' participation, the brokers said.

 

They would "unintentionally constrain proprietary market makers and arbitrage desks, which are key providers of liquidity and price efficiency," the brokers' ​body said.

Restricting funding would also create an uneven playing field between local ‌and foreign firms, potentially shifting market share to overseas participants, who can continue to ​finance ‌transactions through foreign banks, it said.

Emailed queries to the Securities & ‌Exchange Board of India, RBI and ANMI were not answered immediately.

A six-month pause would give market ‌participants time ​to submit feedback, ​conduct impact assessments and engage in constructive consultations, according to the letter.