- Zerodha CEO Nithin Kamath warned RBI's new rules will raise brokerage funding costs
- New RBI norms from April 1 require 100% secured funding, ending personal guarantees
- Intraday and MTF financing costs will increase due to higher collateral requirements
Zerodha founder and CEO Nithin Kamath warned about how the RBI's new capital market amendments will hike funding costs for brokerages.
In a post on X, Kamath stated that they have been trying to understand the RBI's new lending rules for brokers and have spoken to a few people from the industry to figure out what's actually changing.
The new rules, which come into effect from April 1 onwards, will significantly increase capital requirements and reduce the leverage available to brokerage houses. Under the current regime, brokers often secure bank guarantees (BGs) by offering 50% in the form of fixed deposits while covering the remaining half through personal or corporate guarantees. The RBI is ending this practice. Starting in April, all funding must be 100% secured, meaning personal or corporate guarantees will no longer be applicable.
Kamath highlighted how intraday funding will get more expensive with the new 100% collateral requirement, along with MTF financing, which now requires banks to give 100% collateral with at least 50% as cash or cash equivalents.
"Now, because of this circular, intraday funding will get more expensive with the new 100% collateral requirement (up from 50%). MTF financing will also likely cost more since banks now need 100% collateral with at least 50% as cash or cash equivalents. All of this kicks in from April 1, 2026," Kamath stated in his post.
According to Kamath, while costs are rising across the board for brokerages, it is uncertain whether this will pass down to the customers. He also pointed out that nothing will change for Zerodha customers because of these amendments, as the platform has zero external financing.
Further, the Zerodha CEO said the practice of banks funding proprietary trading will come to and end now, even though it was never actually allowed.
"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. That's now completely shut down," he explained.
Kamath also underlined that preferential treatment for 'Professional Clearing Members' or PCMs is also gone now. Brokers who rely on PCMs will now face higher costs as they also need 50% collateral going forward instead of the 25% earlier.
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