Overview
India's markets regulator has proposed a package of changes aimed at reinforcing safeguards around margin trading and increasing flexibility in how brokers and traders access funds. The recommendations were published on Thursday and respond to a notable expansion in margin trading facility volumes.
Proposed changes to funding and collateral
The regulator recommended broadening funding avenues for MTF by permitting the use of non-convertible debentures as a source of financing. It also proposed extending the range of securities that can be accepted as collateral, aligning MTF collateral rules more closely with those applied in the broader cash market.
Scale of MTF growth
Exchange figures cited by the regulator indicate that outstanding MTF positions reached about 1.3 trillion rupees by mid-2026, roughly 50% higher than the level recorded a year earlier. The trend highlights a rapid increase in leveraged positions routed through margin trading facilities.
Risk controls and client protections
Alongside funding changes, SEBI proposed clearer quantitative caps on broker exposure tied to broker net worth. The proposals also include measures intended to safeguard client funds and require that any passive breaches at the client level be rectified within 30 days.
Scope and next steps
At present, margin trading facility access is limited to select stocks and equity exchange-traded funds. The regulator said it is reviewing which securities should be eligible for margin, collateral, MTF and the Securities Lending and Borrowing Mechanism (SLBM), and that it will publish a separate discussion paper addressing those topics.
Exchange rate reference
The regulator's notice included an exchange-rate reference of $1 = 94.3325 Indian rupees.
Bottom line
The proposals link an expanded set of funding and collateral tools with tighter broker exposure limits and client protections, reflecting a regulatory response to the rapid expansion of margin trading volumes. The review of eligible securities and the forthcoming discussion paper are the next steps in the process.