Reserve Bank of India Governor Sanjay Malhotra delivered a no-nonsense message to rattled markets: the central bank has no intention of softening its new restrictions on loans to proprietary traders and brokers. Speaking in New Delhi on Monday after the RBI board’s deliberations, Malhotra quashed speculation about regulatory rollbacks.
These rules, rolled out at the start of the month, ramp up collateral demands for broker bank guarantees and slam the door on bank funding for prop trading. Effective April 1, they represent a proactive step to curb leverage risks in India’s booming brokerage sector.
The announcement triggered a sell-off in brokerage shares last week, as traders fretted over squeezed liquidity and potential hits to earnings from lower trading activity. In a bid to push back, industry players penned a letter to SEBI, calling for a rethink on the ‘overly stringent’ norms.
Undeterred, Malhotra highlighted the collaborative process behind the rules. ‘These have been finalized following broad consultations, and we’re not revisiting them,’ he declared.
On the inflation front, the Governor noted that RBI’s suggestions for refining the 4 percent target (with a 2-6 percent tolerance) have been forwarded to the government ahead of the March deadline. He sidestepped specifics but stressed continuity.
India’s recent tweak to CPI computation—lowering food’s share in the basket—drew reassurance too: it won’t sway RBI policy. This dual focus on financial prudence and price stability signals the central bank’s balanced strategy amid volatile times.