Market participants are bracing for a structural shift in liquidity as new banking exposure rules, finalized in February 2026, prepare to take effect on April 1, 2026. The regulations mandate a move to a 100% collateralized lending model, effectively ending the era of flexible, partially secured bank credit for intermediaries. Under the revised framework, every ₹100 of credit extended to a broker must be matched by ₹100 of tangible collateral. This replaces the previous system where personal or corporate guarantees were often sufficient. Furthermore, a new 40% mandatory haircut on equity collateral means that ₹100 crore in pledged shares now only provides ₹60 crore in borrowing power, significantly reducing effective leverage. Funding costs are expected to climb sharply due to the new cash trap provisions. Bank Guarantees (BGs) must now be backed by at least 50% collateral, with a minimum of 25% held in pure cash. Previously, brokers could secure large exposures with as little as 1% to 2% in fees. This cash lock-up is projected to impact roughly ₹1.5 lakh crore in bank exposure, potentially putting half of that liquidity at risk. Proprietary trading faces the strictest curbs, with a total ban on bank financing for a broker's own-account investments. Since proprietary and high-frequency traders contribute between 30% and 50% of total market volume, experts warn of wider bid-ask spreads and reduced market depth. Smaller firms heavily reliant on bank lines are viewed as vulnerable to consolidation. The Margin Trading Facility (MTF) segment, currently valued at approximately ₹1,00,000 crore, is also under pressure. While bank funding remains permitted for MTF, the requirement for 50% cash collateral makes the channel increasingly uneconomical. Many large brokerages are already pivoting toward the bond market and commercial paper (CP) to replace traditional bank lines. Despite short-term volatility, the regulator views these measures as essential for systemic stability. The goal is to decouple the banking sector from capital market volatility and curb speculative excesses. While liquidity may see a period of recalibration, the long-term outlook focuses on building a more resilient financial ecosystem with disciplined leverage and improved investor protection. [Understanding RBI's New Broker Lending Norms](https://www.youtube.com/watch?v=8kfPogaxY7A) This video provides a detailed breakdown of the 2026 regulatory changes and their specific impact on major brokerage stocks and market liquidity. http://googleusercontent.com/youtube_content/0