India’s central bank has delayed the roll-out of stricter rules on loans to proprietary traders and some liquidity providers, offering relief as markets are roiled by volatility due to the Iran conflict.
The rules — which were first announced in February — now take effect on July 1 instead of April 1, the Reserve Bank of India said in a statement Monday. The central bank also eased some conditions, allowing funding for proprietary trading against full cash collateral, removing curbs on financing market makers, and broadening acquisition finance to include mergers and amalgamations.
The changes signal a more measured approach by the RBI following a review, tempering an earlier attempt to curb speculative activity that raised concerns over trading volumes. The shift suggests the RBI is wary of exacerbating stress in already volatile markets, even as it continues to address risks from the build-up of leverage in the financial system, according to market watchers.
“It is good that RBI has delayed implementation of these rules as there is a lot of volatility anyway due to the Iran war,” said Deven Choksey, managing director at DRChoksey FinServ. “This will give some breather to prop traders and other participants, and hopefully help in calming nerves.”
The new rules may raise the cost of raising capital for proprietary trading firms and squeeze profits. While Indian banks traditionally do not directly finance proprietary trading, the directive closes a loophole that allowed short-term working capital loans given by banks to be diverted for trading by brokers.
The policy follows a series of steps by authorities to curb speculation, including a sharp increase in transaction taxes on single-stock and index derivatives. They add to curbs introduced in late 2024 to cool a boom that had turned India into a global options hub. Regulators see the measures as a necessary trade-off to prevent market losses from spilling into household finances through leverage and unsecured loans.
Proprietary trading firms accounted for more than 50% of equity options turnover and about 30% of cash equities trading on the National Stock Exchange of India Ltd. last year. Meanwhile, household debt stood at about 41% of gross domestic product as of March 2025, with almost a quarter of financial assets now in stocks and mutual funds.
In the latest statement, the central bank clarified that the caps on loans to individuals against eligible securities will apply at the banking system level, effectively closing any loopholes where borrowers could take loans from multiple banks to exceed limits.
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