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Representatives of the Association of NSE Members of India (Anmi) are scheduled to meet Reserve Bank of India officials on Wednesday to seek a relaxation on recent measures which effectively bar banks from funding proprietary traders for capital markets trades, two people aware of the matter said.
The meeting, requested for by ANMI, comes after the central bank on 30 March deferred its 13 February circular on banks' capital markets exposure for three months through 1 July. Prop traders are brokers who trade for themselves.
"There will be a meeting between three to four members of Anmi and relevant RBI officials," the first person said. "It's important to convey to the RBI that there has been almost no default by any prop broker who availed of bank guarantees over the years."
Prop firms presently secure bank guarantees from lenders by putting up small amounts of cash or cash equivalents as margin, along with personal or corporate guarantees.
The RBI directions on 13 February laid out, among others, that banks may extend guarantees in favour of exchanges or clearing corporations for prop trading, provided these guarantees are fully secured by cash, cash equivalents and government securities, with a minimum 50% cash component.
"There has to be a connect to clarify matters, and that is due. If the regulator (RBI) has an issue, the industry can respond to it while voicing their own concerns," said the second person cited earlier.
The person, however, wasn't sure whether the RBI would relax the curb on funding prop brokers for their capital market trades.
Kamlesh Shroff, president of Anmi, was not immediately available for comment, while an email sent to RBI went unanswered.
The RBI's strictures followed an inspection of some private banks' exposure to capital market intermediaries, an equity market veteran told Mint earlier. The inspection revealed that the same set of prop traders had applied for bank guarantees from each lender, he said.
"There is a risk of public money being used for trading on the equity markets, particularly in speculative derivatives trades," he said back then.
To be sure, prop brokers are major constituents who impart liquidity to the capital markets and take on the risk that hedgers seek to insulate themselves against.
On the BSE cash segment, prop traders contributed to 36.9% of cash market turnover in FY26, with retail/HNI and others accounting for 48.7%, Sebi data showed. On the NSE cash segment, the relevant figures were 30.9% and 44.5%.
Prop trading dominates market share by turnover in the equity derivatives segment of exchanges. For instance, the prop share of total equity derivatives turnover on NSE stood at 59.26% in FY26, with retail /HNI and others accounting for 33.7%.
According to Anmi, bank guarantees worth ₹1.2 trillion were outstanding across exchanges as of February end, and few guarantees have been invoked in the past.
Bank guarantees are contingent liabilities of banks, triggered in favour of beneficiaries if their applicants are defaulting parties in transactions.
Ram Sahgal is a deputy editor at Mint. He has over 20 years of experience in journalism, with previous roles at The Intelligent Investor, Bombay Times, The Economic Times, and The New Indian Express. Between his media roles, he briefly worked at a commodities exchange before returning to his true passion, business journalism. Ram graduated in liberal arts from St Xavier’s College, Mumbai, where he studied films, which explains his move to Bombay Times, where he covered the film industry during the rise of Sunny Deol and Sanjay Dutt. He took a leap of faith to transfer to The Economic Times, and thanks to his restless mind, later moved to cover the commodities beat. Over the past three years, Ram has been tracking the stock markets at Mint. His focus areas include writing about market infrastructure institutions, brokerages, derivatives, and related regulations. His hobbies include spotting trains and understanding the locomotives that power them. In his free time, he takes his octogenarian mother out for drives and goes to the cinema with her on weekends. If he has a dream, it is to write a screenplay for a movie. For now, he enjoys viewing market data on NSE and BSE, observing the shifting mood of Mr Market, and conversing with market experts.
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