Zerodha CEO explains new RBI lending norms
Nithin Kamath, CEO of Zerodha, explained how new lending norms from the Reserve Bank of India will impact brokers and investors. The regulations are shifting the landscape for fintech and related sectors. The changes underscore the need for regulatory agility in product and GTM strategy within India's financial market.
- Effective April 1, 2026, the new RBI guidelines mandate that all credit facilities extended to capital market intermediaries, such as brokers, must be fully secured with 100% collateral. - Bank guarantees issued to exchanges will now require a minimum of 50% collateral, and at least 25% of that collateral must be in cash. - The regulations explicitly prohibit banks from providing funding for proprietary trading activities, with very limited exceptions. - These changes are expected to significantly impact proprietary traders, who account for about 50% of equity options premium turnover, by increasing their costs and reducing leverage. - When equity shares are used as collateral, banks must apply a minimum "haircut" of 40%, meaning a share's value for collateral purposes is reduced by that amount. - Following the announcement, stocks of affected companies reacted sharply, with BSE shares falling 10% and brokerages like Angel One seeing a 6% drop. - For retail investors, the cost of funds for brokers providing intraday leverage will increase, which may lead to brokers either reducing client trading limits or allocating significantly more capital. - The move is seen as a step to enforce greater capital discipline and reduce the unsecured exposure of banks to the volatility of the stock market.
