Mumbai: ANMI, one of the biggest trade bodies of stock brokers in India, has warned that RBI’s move to put in stricter rules for banks to fund some of the broking activities could lead to lower tax revenues for the govt and dry up liquidity on the bourses.The brokers’ body has written to markets regulator Sebi that the implementation of the RBI circular should be delayed by at least six months “to allow market participants to submit feedback and impact assessments and engage in constructive consultation”.The move by RBI, effective April 1, will require stricter risk compliance and bigger collateral, in effect give less borrowing width to brokers, increase costs of trading and dry up liquidity on the bourses, market players said.Among several of the changes that RBI has made, aimed at reducing market-related risks for brokers, one stipulates that funding of brokers must be fully backed by collateral, unlike the present practice where part of the loan could be unsecured.It also says that in case there’s a bank guarantee to an exchange, at least 50% of that must be backed by collaterals while 25% of that should be cash. In case lenders provide stocks as collateral, then banks should not give more than 60% of the value of the stocks as loans.The central bank has also banned banks from funding proprietary trading by brokers. The new rules also said that all loans to brokers by banks should be part of the lender’s overall limits on market lending.
