The Reserve Bank of India (RBI) has introduced new rules for bank funding to capital market intermediaries, effective April 1, 2026. Banks will now require 100% collateral for all borrowing, with at least 50% in cash for many facilities. This move aims to curb leveraged trading and reduce risk to banks. Earlier, brokers could offer partial security or promoter guarantees. Now, stricter rules raise haircuts on equity collateral to at least 40%, up from 25%. Banks are also barred from financing proprietary trading or investment positions of intermediaries. This will push equity brokers to seek funding from bond markets and commercial papers, increasing their costs. Analysts warn it will compress margins and lower returns on equity. Proprietary traders, who make up 30-50% of market volumes, face the biggest impact. JM Financial Institutional Securities said, "We believe credit facilities with 100% (or higher) collateral will make the bank channel unsuitable for brokers, and they will only use it for short-term mismatches." Brokers relying heavily on bank lines, like Angel One and Groww, will need to turn to non-convertible debentures, commercial papers, and NBFC loans. IIFL Capital’s Devesh Agarwal noted, "These measures will directly affect proprietary traders and brokers by increasing capital requirements, compressing margins, and lowering ROE. Market liquidity may also be impacted." With minimum haircuts of 40% on equity, 25% on ETFs, and 15-40% on debt securities, usable collateral falls sharply. This raises funding costs and may reduce liquidity in equity and derivatives markets.