In a firm statement that has eased some market jitters, Reserve Bank of India Governor Sanjay Malhotra announced on Monday that there are no plans to alter the recently introduced regulations governing bank loans to proprietary traders and brokers. The clarification came during a press conference following the RBI’s board meeting in New Delhi.
The new guidelines, unveiled earlier this month, impose stricter collateral requirements for bank guarantees extended to brokers and outright prohibit banks from lending to brokers for proprietary trading activities. Set to take effect from April 1, these measures aim to fortify the financial system’s resilience against potential risks in the trading ecosystem.
Markets reacted sharply last week, with brokerage firm stocks tumbling amid fears that tighter lending norms could squeeze profit margins and dampen trading volumes. Brokers have responded by urging the market regulator SEBI to review the rules, even dispatching a formal letter highlighting their concerns.
Governor Malhotra dismissed calls for revisions, emphasizing that the norms were crafted after extensive consultations with stakeholders. ‘No changes to these regulations are under consideration,’ he asserted categorically.
Shifting focus to macroeconomic priorities, the Governor revealed that the RBI has submitted its recommendations to the government on the inflation targeting framework, due for review by the end of March. While details remain under wraps, he reaffirmed the central bank’s commitment to maintaining retail inflation at 4 percent, within a 2-6 percent band.
Recent updates to India’s retail inflation calculation methodology, including a reduced weightage for food items in the consumer basket, were also addressed. Malhotra assured that these methodological shifts would not influence the RBI’s inflation targeting stance.
As India navigates global economic headwinds, the RBI’s steadfast approach underscores its priority on systemic stability over short-term market sentiments. Investors will watch closely how these rules unfold from April onwards.