On Monday, February 16, 2026, the Indian stock market witnessed a sharp sell-off in the capital markets sector. Heavyweights like BSE Ltd, Angel One, and the parent company of Groww saw their share prices plummet by nearly 10% in a single session. This "tailspin" comes as a direct reaction to the Reserve Bank of India’s (RBI) latest regulatory amendments aimed at tightening the belt on how brokerages and exchanges operate.
The new framework, titled the Commercial Banks – Credit Facilities Amendment Directions, 2026, is set to transform the financial landscape when it takes effect on April 1, 2026.
Why are Capital Market Stocks Falling?
The primary driver behind the investor panic is the RBI’s crackdown on leverage. For years, capital market intermediaries (CMIs) have relied on flexible bank funding to fuel high-volume trading. The new RBI new rules effectively end the era of "easy money" for brokerages.
The Death of Bank-Funded Proprietary Trading
Perhaps the most significant blow is the explicit ban on bank financing for proprietary trading.
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What it is: Proprietary trading is when a firm trades using its own capital to seek direct gain rather than earning commissions from clients.
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The Change: Banks are now strictly prohibited from providing loans or credit lines to brokers for their own account investments.
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The Impact: Since "prop desks" account for over 50% of equity options turnover on major exchanges, analysts at Jefferies warn that this could hit BSE’s earnings by as much as 10%.
Stricter Collateral Norms: A 100% Security Mandate
The RBI is shifting from a "risk-based" approach to a "fully secured" model. Under the new guidelines, any credit facility extended to a broker must be backed by 100% eligible collateral.
Key Changes to Funding Structures:
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No Unsecured Guarantees: Personal or promoter guarantees are no longer sufficient. Every rupee borrowed must be matched by tangible assets.
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The "Cash Trap" for Guarantees: For bank guarantees issued to exchanges, a minimum of 50% must be backed by collateral, and at least 25% of that must be in hard cash.
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Equity Haircuts: If a broker pledges shares as collateral, the RBI has mandated a minimum 40% haircut. This means if a broker pledges ₹100 worth of stock, the bank will only provide a loan value of ₹60.
Market Reaction: BSE, Angel One, and Groww in the Red
The Nifty Capital Markets index felt the heat immediately. As of Monday afternoon:
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BSE Ltd: Shares dropped 9.5%, hitting a low of ₹2,736.
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Angel One: Slipped 6% as investors worried about the impact on its Margin Trading Facility (MTF).
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Groww (Billionbrains Garage Ventures): Declined over 5%, with experts suggesting the platform may need to raise fresh market capital to meet the new liquidity standards.
The Bigger Picture: Stability Over Speed
Why is the RBI doing this now? The regulator is concerned that the explosion in proprietary trading and retail derivatives has created a systemic risk. By forcing brokers to use their own "skin in the game" rather than bank-borrowed leverage, the RBI aims to protect the banking system from a potential market crash.
While these RBI new rules may cause short-term pain and lower trading volumes, many analysts believe they will lead to a more stable, institutionalized market in the long run.
