RBI Reforms: A Civilized Reset for Debt Recovery and Broker Funding
- Editor
- February 18, 2026
- Banking & Finance, Economy
- 0 Comments
New Delhi, February 2026 — In a major regulatory sweep, the Reserve Bank of India (RBI) has issued two significant mandates aimed at ending the “Wild West” era of loan recovery and high-leverage stock market trading. The new directions, part of the Responsible Business Conduct Amendment 2026, focus on restoring borrower dignity and insulating the banking system from capital market volatility.
The “7 PM” Rule: Decency in Debt Recovery
For years, the aggressive tactics of recovery agents have been a flashpoint for consumer anger. The RBI’s new framework, effective from July 1, 2026, finally sets firm boundaries on how and when lenders can pursue dues.+1
- Strict Calling Window: Recovery agents and bank employees are now strictly prohibited from calling or visiting borrowers before 8:00 AM or after 7:00 PM.
- The Relative Shield: In a move to stop “social shaming,” agents are now legally barred from contacting a borrower’s friends, family, or colleagues. They may only deal with the borrower or the guarantor.
- Mandatory Recording: Every recovery call must now be recorded, and the borrower must be informed of this at the start of the conversation.
- Respecting Life Events: Agents are explicitly forbidden from making recovery attempts during “inappropriate occasions,” such as weddings, festivals, or periods of family bereavement.
Ending the Brokerage “Bubble”: 100% Collateral Mandate
While the recovery rules protect individuals, the RBI’s second mandate, effective April 1, 2026, aims to protect the entire financial system from a stock market crash. The central bank has completely ended the era of “flexible” or unsecured lending to stockbrokers.
- 100% Secured Funding: Banks must now ensure that every rupee lent to a broker or capital market intermediary is backed by 100% eligible collateral. The days of using personal guarantees or “partially secured” lines to fund market operations are over.
- The “Cash Trap”: For bank guarantees issued to stock exchanges, the RBI has mandated a 50% minimum collateral, of which at least 25% must be in hard cash. This ensures that brokers have real skin in the game.
- Mandatory Haircuts: To account for market volatility, banks must apply a minimum 40% haircut on equity shares pledged as collateral. This means if a broker pledges ₹100 worth of shares, the bank can only provide a loan of up to ₹60.+1
Proprietary Trading: The “No-Go” Zone
In perhaps the most significant move for market stability, the RBI has strictly prohibited banks from financing proprietary trading. Brokers can no longer use bank loans to take bets using their own firm’s capital.+1
The only exception is for “market-making” (providing liquidity to the market), but even then, those securities cannot be used as collateral for further loans. This “firewall” prevents a scenario where a broker’s bad bet in the market could directly trigger a crisis at a commercial bank.
Bottom Line
The RBI is sending a dual message: Human dignity is non-negotiable, and systemic risk is intolerable. By reining in recovery agents, the regulator is protecting the mental health of millions. By tightening the screws on broker funding, it is ensuring that the current stock market boom doesn’t turn into a systemic bust.
