“It is good that RBI has delayed implementation of these rules as there is a lot of volatility anyway due to the Iran war,” said Deven Choksey, managing director at DRChoksey FinServ. “This will give some breather to prop traders and other participants, and hopefully help in calming nerves.”
The new rules may raise the cost of raising capital for proprietary trading firms and squeeze profits. While Indian banks traditionally do not directly finance proprietary trading, the directive closes a loophole that allowed short-term working capital loans given by banks to be diverted for trading by brokers.
The policy follows a series of steps by authorities to curb speculation, including a sharp increase in transaction taxes on single-stock and index derivatives. They add to curbs introduced in late 2024 to cool a boom that had turned India into a global options hub. Regulators see the measures as a necessary trade-off to prevent market losses from spilling into household finances through leverage and unsecured loans.
Proprietary trading firms accounted for more than 50% of equity options turnover and about 30% of cash equities trading on the National Stock Exchange of India Ltd. last year. Meanwhile, household debt stood at about 41% of gross domestic product as of March 2025, with almost a quarter of financial assets now in stocks and mutual funds.
In the latest statement, the central bank clarified that the caps on loans to individuals against eligible securities will apply at the banking system level, effectively closing any loopholes where borrowers could take loans from multiple banks to exceed limits.
Disclaimer: This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.
