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Industry body requests SEBI to defer RBI’s 100% bank guarantee rule implementation by six monthsANMI asks SEBI to halt RBI’s 100% cash collateral rule for CMIs, warning it could harm market liquidity and foreign investment, citing global precedents.By Yash Jain   |  Anshul  February 19, 2026, 10:04:33 AM IST (Updated)3 Min ReadThe Association of National Exchanges Members of India (ANMI) has requested the Securities and Exchange Board of India (SEBI) to keep in abeyance the recent Reserve Bank of India (RBI) amendment that mandates 100% cash collateral for bank guarantee (BG) facilities extended to Capital Market Intermediaries (CMIs) involved in proprietary trading.

In a submission dated February 18, ANMI highlighted concerns from its members regarding potential unintended consequences of the directive, which came through RBI circular dated February 13.

While acknowledging the regulator’s intent to strengthen prudential norms, the industry body cautioned that the increased collateral requirement could affect market liquidity, depth, and foreign investment participation.

Impact on proprietary trading and market liquidity

Proprietary trading firms, which are well-capitalised and regulated equity brokers, play a critical role in market-making, arbitrage, and efficient price discovery.

ANMI noted that raising the BG collateral from 50% to 100% could restrict access to banking finance for these entities, potentially reducing market depth, widening bid-ask spreads, and increasing transaction costs for end investors.

The association also raised concerns about the impact on Foreign Portfolio Investors (FPIs), arguing that lower liquidity and higher costs may make Indian markets less attractive to overseas participants.

ANMI further pointed out that domestic firms could be disadvantaged relative to foreign players who can meet margin requirements through SBLCs backed by overseas banks, creating an uneven competitive landscape.

Low risk profile of the segment

According to the submission, the capital market intermediary segment has historically exhibited near-zero non-performing assets (NPAs), with roughly ₹1.20 lakh crore in bank guarantees outstanding across exchanges.

ANMI emphasised that banks have not invoked these BGs even during periods of extreme volatility, including the 2008 financial crisis and the COVID-19 market turmoil, indicating the segment’s strong credit profile.

International precedent: Lessons from South Korea

ANMI cited South Korea’s 2011 intervention in the KOSPI 200 options market, where sudden increases in trading costs and deposit requirements led to a collapse in liquidity and a permanent decline in market depth. The association suggested that similar sudden restrictions in India could risk long-term structural damage to market participation and execution quality.

Marginal risk reduction vs market impact

ANMI quantified that the proposed increase in BG collateral would reduce overall collateral by approximately ₹22,500 crore – roughly 2.5% of total exchange collateral – while potentially constraining firms that provide critical liquidity and arbitrage services.

Call for consultation

Highlighting that RBI’s October 2025 consultation paper did not indicate any increase in BG requirements to 100%, ANMI requested a six-month abeyance of the amendment to allow market participants to provide feedback and conduct impact assessments.

It must be noted RBI’s amendment mandates that banks providing guarantees for proprietary trading positions by CMIs maintain full cash collateral against these guarantees, up from the earlier 50% requirement. The measure is intended to strengthen prudential norms but has prompted concerns about liquidity, market efficiency, and foreign investor participation.

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