RBI's tighter lending norms rattle capital market stocks

Shares of capital market firms fell sharply after the Reserve Bank of India introduced stricter lending norms for securities intermediaries.

The Nifty Capital Markets index declined 2.02% to 4,691.80, reflecting broad weakness across capital market stocks. BSE plunged 7.22%, while Angel One fell 4.57% and Groww declined 3.12%. Multi Commodity Exchange of India slipped 2.63% and Nuvama Wealth Management dropped 2.33%. UTI Asset Management Company lost 0.87%, 360 One WAM edged down 0.28%, and Motilal Oswal Financial Services was marginally lower by 0.04%.

The RBI has tightened rules on loans taken by firms engaged in proprietary trading and those offering leverage to clients, aiming to curb speculative activity.

 

Under the new guidelines, effective April 1, all credit extended to brokers must be fully collateralised. Lending for proprietary trading will be barred, and bank guarantees for such trades must be backed by at least 50% cash collateral.

The move comes after a recent hike in Securities Transaction Tax (STT). Market participants fear the tighter regulations could reduce trading volumes, given that proprietary firms account for a significant share of equity options and cash market turnover.

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