On Monday, February 16, 2026, shares of major capital market companies like BSE, Angel One, and MCX faced heavy losses, dropping as much as 10%. This sudden fall came after the Reserve Bank of India (RBI) announced new rules regarding funding for brokers and capital market intermediaries. Analysts say these norms will increase costs for brokers and proprietary traders, leading to cautious trading in the stock market.
Overview of Contents
What Are the New RBI Funding Norms?
The RBI released its updated guidelines for lending to capital market entities on February 13, 2026. These norms will come into effect from April 1, 2026. The key points are:
- Full Collateral Requirement: Brokers must provide 100% collateral for loans from banks.
- High Haircut on Shares: Equity shares used as collateral will face a minimum 40% haircut in value.
- Margin Trading Funding: At least 50% of margin trading loans must have cash collateral.
The move is aimed at reducing risk in the banking system and making lending safer, but it is expected to raise costs for brokers who rely on bank loans to fund trading activities.
Why Capital Market Stocks Fell
Shares of brokers and stock exchanges fell sharply because these new rules make borrowing from banks costlier and less attractive.
- BSE Ltd dropped 9.8% intraday to ₹2,726 per share.
- Angel One fell 9.5% to ₹2,441.
- MCX declined 7.4%.
Other brokerage and wealth management companies also saw losses, while the Nifty Capital Markets Index dropped 4.3% intraday.
Analysts at JM Financial said banks will benefit from these rules as they can participate more in acquisitions and mergers, but brokers and capital market intermediaries may face higher trading costs and will need to find alternative funding sources.
Impact on Brokers and Trading
Retail brokers and professional traders will feel the biggest impact:
- Higher Costs: Cash collateral requirements and share haircuts will increase the cost of borrowing.
- Diversifying Funds: Brokers may turn to non-bank finance companies, commercial paper, or structured products for funding.
- Reduced Leveraged Trading: Traders using borrowed funds for large trades may slow down activity, affecting market volumes.
For example, Angel One may have to restructure its funding for its margin trading book of ₹6,100 crore, and Groww might need market-based funding as its margin book grows rapidly.
Who Benefits from the RBI Norms?
While brokers face challenges, banks and individual investors could gain:
- Banks can now finance mergers, acquisitions, and leveraged buyouts under strict guidelines.
- Loans against listed shares, mutual funds, ETFs, REITs, and rated debt are allowed within defined limits.
- Individuals can borrow up to ₹25 lakh for IPO, FPO, and ESOP investments, with only 25% margin.
These changes create safe, high-yield opportunities for banks while keeping risks under control.
Opinion and Market Outlook
The RBI norms are a clear signal that regulators want to ensure safer lending in capital markets. While this may slow down speculative trading temporarily, it could strengthen long-term stability in the stock market. Investors may see volatility in capital market stocks in the short term, but banks and asset management companies could benefit from new lending opportunities.
In my view, brokers will need to innovate in funding strategies, possibly opening doors to structured finance and alternative lending products. Retail investors should watch for short-term market dips as an opportunity to invest cautiously.
Conclusion
The fall of BSE, Angel One, and MCX shares was driven by the RBI’s tighter funding rules. Brokers face higher costs, reduced bank lending, and may explore alternative funding options. Banks, on the other hand, have more room to participate in acquisitions and lending. Overall, the new norms aim to balance market growth with systemic safety, leading to short-term volatility but potentially more stability in the long run.
FAQs
What exactly did the RBI change in its funding rules?
The RBI now requires brokers to provide 100% collateral for loans, with at least a 40% haircut on equity shares. Margin trading loans must have 50% cash collateral. These rules make bank funding costlier for brokers.
Why did BSE and Angel One shares fall so sharply?
These companies rely on bank funding for their operations and margin trading facilities. Higher collateral requirements mean higher costs, leading to reduced profitability and a negative market reaction.
Who benefits from these new RBI rules?
Banks and individuals benefit. Banks can lend for mergers, acquisitions, and structured finance safely. Retail investors can borrow against shares and mutual funds for IPOs and other investments.
Will these rules affect retail investors?
The impact on retail investors is expected to be limited. However, leveraged traders may reduce activity, which could affect market volumes temporarily.
How should brokers respond to these rules?
Brokers may diversify funding sources, including non-bank financial institutions, commercial paper, and structured products. They will also need to manage margin trading books more efficiently.