Groww and Other Brokerage Stocks in Focus After RBI Tightens Funding Regulations

Synopsis: Capital market stocks fell upto 10% after the RBI mandated 100 percent secured funding, higher collateral haircuts, and tighter capital norms, potentially pressuring leverage, liquidity, and trading-driven revenues. Citi mentions that this will mainly affect the proprietary trading firm’s books

The Reserve Bank of India’s decision to tighten funding norms for stock brokers has brought the brokerage and capital market ecosystem into sharp focus. By mandating 100 percent secured borrowings, raising collateral haircuts, and increasing cash-backed guarantee requirements, the regulator aims to curb excessive leverage and strengthen systemic risk management across intermediaries.

This article explains what the new guidelines entail, how higher collateral and reduced borrowing capacity could affect liquidity, proprietary trading, and margins, and which listed brokerage and capital market stocks may remain in focus as the market assesses the earnings and valuation impact.

What happened

The Reserve Bank of India has tightened funding norms for brokers, mandating 100 percent secured borrowings from April 1, 2026. Personal or corporate guarantees will no longer suffice; loans must be fully backed by tangible collateral. Additionally, bank guarantees to exchanges require at least 50 percent collateral backing, including 25 percent pure cash, increasing capital lock-in.

The central bank has also raised the minimum haircut on pledged equity collateral to 40 percent, meaning banks will value shares at only 60 percent of the market price. This reduces borrowing capacity and compels brokers to pledge additional assets to maintain credit lines, directly impacting liquidity management and balance sheet efficiency.

Collectively, these measures are expected to compress leverage across the brokerage industry. Higher collateral requirements and restricted proprietary trading limited mainly to essential activities like market-making or debt warehousing could pressure margins and expansion plans, with smaller brokers likely facing disproportionate strain under the tighter regulatory framework.

According to Citi, the Reserve Bank of India’s draft guidelines could slow trading activity in certain segments, especially in proprietary books where firms deploy their own capital. However, it is still too early to clearly estimate the full impact on earnings or profitability, as the final shape and implementation details remain uncertain.

Businesses that depend heavily on transaction volumes, such as brokers, clearing members, and stock exchanges, may face higher exposure under the proposed framework. If trading activity moderates or capital usage tightens, revenue growth in these segments could come under pressure. Stocks to watch: brokerage firms, clearing corporations, and listed exchanges.

Brokerage stocks slipped from their opening levels after the RBI tightened funding regulations for stock brokers, dampening investor sentiment. Groww declined 5 percent, Angel One fell sharply by 9 percent, while IIFL Securities dropped 2 percent. 5paisa Capital slipped 2.89 percent, Motilal Oswal Financial Services lost 3 percent, Nuvama Wealth Management fell 4.65 percent, and BSE Ltd dropped around 10 percent, reflecting a cautious market reaction.

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