RBI Tightens Lending Rules For Market Entities: Collateral, Haircuts, Limits; All You Need To Know
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The RBI changes some rules about how banks can lend money to stock market-related companies such as brokers, clearing members, and securities firms.
Shares of BSE Ltd, Billionbrains Garage Ventures Ltd (Groww), Angel One Ltd and other capital market names fell as much as 10% on Monday, February 16.
The Reserve Bank of India (RBI) has changed some rules about how banks can lend money to stock market-related companies such as brokers, clearing members, and securities firms. These new rules will start from April 1, 2026. Here’s what this means:
Why Did RBI Change the Rules?
The RBI wants to make sure that when banks lend money, it is safe and secure and does not create risk for the financial system. So, RBI has tightened rules to reduce risky lending, prevent misuse of loans, and keep the financial system stable.
Loans Must Be Fully Secured
Earlier, banks sometimes gave loans without full security. Now, every loan given to these market firms must be fully backed by assets (called collateral). Collateral means something valuable kept as a guarantee — like shares, bonds, gold bonds, and commercial paper.
If the borrower cannot repay, the bank can recover money using this collateral.
RBI Fixes ‘Haircuts’ on Collateral
A haircut means banks will count only part of the asset’s value, not full value. For example, if a share is worth Rs 100 and haircut is 40%, the bank will treat it as worth only Rs 60.
Haircuts announced:
Shares → 40%
AAA bonds → 15%
Sovereign gold bonds → 25%
Commercial paper → 15-25%
Why haircut? Because prices can fall. The RBI wants banks to stay safe even if asset value drops.
Banks Must Keep Checking Collateral
Banks cannot just accept collateral once and forget it. They must regularly check its value, ask for more collateral if value falls, and reduce loan if security becomes insufficient.
No Loans for Brokers’ Own Trading
Banks cannot lend money to brokers or market firms for their own trading or their own investments. But, banks can still lend for settlement payments, margin funding, working capital needs, and market-making activities.
So, banks can support business operations — but not risky speculation.
Limits on How Much Banks Can Lend
RBI has kept strict limits:
Total exposure to capital markets → max 40% of bank’s Tier-1 capital
Direct exposure → max 20%
This prevents banks from putting too much money into stock market-related loans.
How Brokerage Firms React
Shares of BSE Ltd, Billionbrains Garage Ventures Ltd (Groww), Angel One Ltd and other capital market names fell as much as 10% on Monday, February 16.
Jefferies said it sees the BSE most affected by the new regulations on proprietary trading, which could result in a 10% earnings impact on the exchange operator.
What Experts Think
According to a report by JM Financial, the RBI’s new rules on banks’ capital market exposure will allow lenders to actively participate in corporate takeovers, mergers and acquisitions (M&A), and leveraged buyouts.
The report said the new framework will allow banks to fund acquisition deals while keeping risks under control. It added that by setting limits on the debt-to-equity (D/E) ratio after acquisition and capping capital market exposure (CME), only financially stable companies will be able to access bank funding.
This will help reduce systemic risk, which means lowering the chances of financial instability in the banking system.
It stated, “We believe the new rules will allow banks to actively participate in corporate takeovers, M&A, leverage buyouts, etc… Meanwhile, enhanced limits for loans against securities for individuals should provide deeper liquidity.”
According to the report, these rules will help companies get funds for acquisitions and also increase the flow of money in the market.
The RBI issued these new directions on February 13, 2026. These rules will come into effect from April 1, 2026, or earlier if banks adopt them sooner.
One of the key changes is that banks can now fund up to 75 per cent of the cost when one company wants to buy another company. This is called acquisition financing. However, only strong and financially stable companies will be eligible.
These companies must have a net worth of more than Rs 5 billion, must have earned profits in the last three financial years, or must have a good credit rating.
After the acquisition, the company’s total debt should not be more than three times its own capital. This rule is meant to ensure companies do not take too much loan and reduce financial risk.
The RBI has also allowed banks to give more loans to individuals against their investments such as shares, mutual funds, ETFs, REITs, and InvITs. These investments act as security for the loan. The maximum loan limit for individuals has been set at Rs 10 million. Out of this, up to Rs 2.5 million can be used to buy shares from the stock market.
Banks can also provide loans of up to Rs 2.5 million to individuals to invest in IPOs, FPOs, and ESOPs. An IPO is when a company sells its shares to the public for the first time.
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February 16, 2026, 10:37 IST
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