Reserve Bank of India has tightened leverage rules in the derivatives market. From July 2025, proprietary traders must provide 100% collateral for bank guarantees, with 50% in cash and 50% in non‑cash assets. Earlier, only 50% collateral was required. This change has reduced leverage and increased funding costs for traders.
To manage, many proprietary desks are now turning to high net worth investors. They pledge idle client shares as collateral to meet margin needs. For example, shares worth ₹1 crore can be pledged to support a derivatives position of up to ₹5 crore, assuming a 20% margin requirement. Investors earn returns from otherwise idle holdings but face risks if trades fail.
Regulators worry that such practices may recreate hidden leverage, undermining RBI’s intent to reduce systemic risk. Experts caution that these arrangements need close scrutiny under collateral and risk management rules.
The impact is already visible in market turnover. In July 2026, daily derivatives turnover on NSE fell 25% to ₹1.22 lakh crore, while BSE turnover dropped 30% to ₹27,255 crore. Liquidity worth over ₹50,000 crore has been squeezed. Analysts believe foreign firms may benefit as domestic restrictions open space for global players.
RBI’s move aims at stability, but traders’ innovations raise new concerns.
