RBI’s new stricter rules for banks’ exposure to capital markets will now start from July 1.
New Delhi:
RBI Defers New Capital Market Rules Till July 1: If you trade in shares, this matters to you. The Reserve Bank of India (RBI) has given brokers and traders three more months of relief amid the ongoing Iran was and the consequent market volatility. The central bank’s new stricter rules for banks’ exposure to capital markets will now start from July 1. The earlier implementation date was April 1.
What This Means
- Brokers can keep using bank guarantees with 50 per cent margin
- Banks do not have to insist on 100 per cent cash for now
- Trading activity will not face an immediate cash squeeze
- Market liquidity is protected for the next three months
Why This Relief Matters
- If banks had moved to 100 per cent cash backing:
- Brokers would get less funding
- Trading volumes could fall
- Buying and selling shares would become costlier
- Foreign investors could lose interest due to poor liquidity
The decision comes as RBI did not want to disturb markets when they are already volatile due to the Iran conflict.
What RBI Is Trying To Stop
RBI found that some brokers were using short-term bank loans meant for business needs to do trading. The new rules (effective July 1) will try to stop this. So, the relief is temporary. The main rule is still coming. Here are the other important changes you should know:-
- Banks can lend to brokers if the loan is backed fully by cash or cash-like security
- Market makers can now get funding against the same shares they deal in
- Banks giving payment guarantees to stock exchange clearing corporations will face easier capital rules
What Changes From July 1 (Across All Banks):
- You can take only Rs 10 lakh loan against shares
- You can take only Rs 25 lakh for IPO funding
- You cannot take these limits from multiple banks
Big Change In Acquisition Loans
RBI has also allowed banks to fund acquisitions, including mergers. Earlier, banks could not do this. Now they can, but only to buy control in a non-financial company.
Relief For Mutual Funds Too
A technical rule for non-debt mutual funds has been relaxed. This removes an operational headache for them.
- Banks will ask for 100 per cent cash behind bank guarantees
- Funding for trading will become tighter
- Costs for proprietary traders may go up
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