Groww, BSE to Angel One: Brokerage stocks down up to 10% — Are RBI’s new norms behind the fall?

Shares of BSE, Billionbrains Garage Ventures (Groww), Angel One and other capital market-linked stocks declined by as much as 10% on Monday, February 16, after the Reserve Bank of India (RBI) announced amendments to banks’ capital market exposure norms.

BSE shares tumbled as much as 9.5% to hit the day's low of ₹2,736, while Angel One shares lost 6% at ₹2,540.40 apiece. Billionbrains Garage Ventures, the parent firm of Groww, declined 5%, JM Financial shed 4.5%, and Anand Rathi, Motilal Oswal and Jio Financial Services fell between 1.5%-3.5% each.

RBI tightens broker lending norms

Last week, the RBI tightened regulations governing loans extended to firms engaged in proprietary trading in equities and commodities, as well as those providing leverage to clients. The move is aimed at curbing excessive speculative activity in the domestic markets and strengthening risk management across the financial system.

On Friday, the central bank issued the Commercial Banks – Credit Facilities Amendment Directions, 2026, finalising changes that were first outlined in a draft consultation paper released in October 2025.

Under the revised framework, banks can extend credit to SEBI-regulated brokers and intermediaries only on a fully secured basis. Partial security, unsecured guarantees or promoter-only guarantees will no longer be permitted. Every loan must now be backed entirely by collateral.

For bank guarantees issued in favour of stock exchanges or clearing corporations, the RBI has mandated stricter safeguards. Such guarantees must be backed by at least 50% collateral, with 25% of this maintained in cash. Where equity shares are provided as collateral, banks must apply a minimum 40% haircut while valuing them.

The RBI has also clarified that banks cannot fund proprietary trading by brokers. Proprietary trading refers to firms trading in shares, commodities or derivatives using their own capital to earn profits. However, banks may continue to finance market-making activities and short-term warehousing of debt securities.

Margin trading facilities offered by brokers to clients can continue to receive bank funding, provided such lending is fully secured. Banks will also be required to incorporate margin call provisions and monitor collateral values on an ongoing basis.

All lending to capital market intermediaries will be counted under banks’ capital market exposure limits, which are subject to prudential caps. This may affect the overall availability of funding to the sector.

The RBI said all credit facilities to securities firms must be collateral-backed, and lending for brokers’ own trading or investments will be prohibited. These revised prudential norms will come into effect from April 1.

Decoding the impact of RBI's new norms

JM Financial said the revised norms could enable banks to participate more actively in M&A, takeovers and leveraged buyouts, while ensuring risks remain contained by restricting access to financially stable corporates.

The brokerage said, “By stipulating ceilings on post-acquisition D/E ratios and capital market exposure for banks, the new framework enables participation in M&A and leveraged buyouts while ensuring only stable corporates access to such funding, thereby keeping a check on systemic risk across the financial system.”

The brokerage added that higher limits for loans against securities for individuals may support market liquidity. However, it cautioned that the 100% collateral requirement for funding to capital market intermediaries—along with a 40% haircut on shares and higher cash needs for MTF—could restrict bank funding and raise trading costs. JM Financial expects Angel One to reassess its ₹61 billion MTF funding, while Groww may need market funding as its MTF book scales rapidly.

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