RBI introduces stricter lending norms for brokers and capital market intermediaries, set to take effect on April 1. The new regulations mandate 100% collateral for credit facilities, standardizing loan-to-value ratios across different securities. Proprietary trading desks will likely face significant challenges, with potential reduction in trading volumes and increased borrowing costs. Banks must now provide fully-secured loans, with specific LTV caps: 60% for listed shares and convertible debt, 75% for mutual funds and ETFs. These changes aim to enhance transparency and reduce risk in financial market lending. The impact is already visible, with broker stock prices declining following the announcement. Proprietary trading, which accounts for substantial market volumes, may see considerable transformation under these new regulatory guidelines.
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