RBI’s April 1 broker rules explained: What do 40% haircuts, cash mandates mean for traders?
Kamath warned that "costs are rising across the board for brokerages, and this may or may not get passed to you, the customer."
- Mar 26, 2026,
- Updated Mar 26, 2026 1:33 PM IST
April 1, 2026, is likely to be an important day for the Indian stock market. Not only are traders looking for a steeper Securities Transaction Tax (STT) on futures and options, but the Reserve Bank of India (RBI) is overhauling how brokers get funded.
RBI tightens broker rules
The central bank's latest directions on credit facilities to Capital Market Intermediaries (CMIs) tighten the screws on leverage, demanding haircuts and heavy cash collaterals.
Nithin Kamath, founder and CEO of Zerodha, summed up the regulatory shift in its blog post, noting that "things are still evolving" as the industry digests the rules.
According to the RBI circular, banks "shall not provide finance to a CMI for acquisition of securities on its own account, including for proprietary trading or investments". Kamath explained that while this was actually never allowed, banks and brokers had found clever workarounds.
"Here’s how it worked—prop desks would deposit an FD of Rs 50 crore, get a bank guarantee for Rs 100 crore, and place it with the clearing corporation for margins to trade with 2x leverage," Kamath wrote.
Kamath confirmed that this practice is now completely shut down.
The RBI mandates the facility must be fully secured by collateral of cash, cash equivalents and government securities, out of which a minimum of 50 per cent shall be cash.
40% haircut
For retail investors using the Margin Trading Facility (MTF), expect the tap to tighten. The RBI has ordered banks to apply strict valuations to collateral, enforcing a minimum haircut of 40 per cent in case of equity shares.
Furthermore, financing provided to brokers for MTF must now be fully secured by collateral of cash, cash equivalents and government securities out of which a minimum of 50 per cent shall be cash.
Kamath also pointed out that MTF financing will also likely cost more because of these stringent 100% collateral requirements. He added that intraday funding will similarly get more expensive due to these new mandates.
Kamath said that Professional Clearing Members (PCMs) previously only needed 25% collateral to secure a Rs 100 bank guarantee, but they will now need up to 50%.
RBI said Security deposits or margin requirements must be "secured by a minimum collateral of 50 per cent, out of which 25 percent shall be in cash". Also, under the new directions, the RBI classifies these units as "Eligible Securities". However, there is a strict carve-out: units of ETFs are allowed, but "excluding gold, silver and any other commodity ETFs".
Trading costs may rise
Consequently, Kamath warned that "costs are rising across the board for brokerages, and this may or may not get passed to you, the customer."
Meanwhile, as announced in the Union Budget 2026–27, the STT on futures contracts will jump to 0.05 per cent from 0.02 per cent starting April 1. Meanwhile, the tax on options premiums and the exercise of options will surge to 0.15 per cent, up from 0.1 per cent and 0.125 per cent, respectively.
April 1, 2026, is likely to be an important day for the Indian stock market. Not only are traders looking for a steeper Securities Transaction Tax (STT) on futures and options, but the Reserve Bank of India (RBI) is overhauling how brokers get funded.
RBI tightens broker rules
The central bank's latest directions on credit facilities to Capital Market Intermediaries (CMIs) tighten the screws on leverage, demanding haircuts and heavy cash collaterals.
Nithin Kamath, founder and CEO of Zerodha, summed up the regulatory shift in its blog post, noting that "things are still evolving" as the industry digests the rules.
According to the RBI circular, banks "shall not provide finance to a CMI for acquisition of securities on its own account, including for proprietary trading or investments". Kamath explained that while this was actually never allowed, banks and brokers had found clever workarounds.
"Here’s how it worked—prop desks would deposit an FD of Rs 50 crore, get a bank guarantee for Rs 100 crore, and place it with the clearing corporation for margins to trade with 2x leverage," Kamath wrote.
Kamath confirmed that this practice is now completely shut down.
The RBI mandates the facility must be fully secured by collateral of cash, cash equivalents and government securities, out of which a minimum of 50 per cent shall be cash.
40% haircut
For retail investors using the Margin Trading Facility (MTF), expect the tap to tighten. The RBI has ordered banks to apply strict valuations to collateral, enforcing a minimum haircut of 40 per cent in case of equity shares.
Furthermore, financing provided to brokers for MTF must now be fully secured by collateral of cash, cash equivalents and government securities out of which a minimum of 50 per cent shall be cash.
Kamath also pointed out that MTF financing will also likely cost more because of these stringent 100% collateral requirements. He added that intraday funding will similarly get more expensive due to these new mandates.
Kamath said that Professional Clearing Members (PCMs) previously only needed 25% collateral to secure a Rs 100 bank guarantee, but they will now need up to 50%.
RBI said Security deposits or margin requirements must be "secured by a minimum collateral of 50 per cent, out of which 25 percent shall be in cash". Also, under the new directions, the RBI classifies these units as "Eligible Securities". However, there is a strict carve-out: units of ETFs are allowed, but "excluding gold, silver and any other commodity ETFs".
Trading costs may rise
Consequently, Kamath warned that "costs are rising across the board for brokerages, and this may or may not get passed to you, the customer."
Meanwhile, as announced in the Union Budget 2026–27, the STT on futures contracts will jump to 0.05 per cent from 0.02 per cent starting April 1. Meanwhile, the tax on options premiums and the exercise of options will surge to 0.15 per cent, up from 0.1 per cent and 0.125 per cent, respectively.