The regulator has instructed banks to discontinue the decades-long practise of financing stock brokers throughout the day without collateral.

Intra-day funding, also known as ‘daylight exposure’ in banking jargon, is a critical facility that allows brokers to tide over a few hours gap pending receipt of funds from stock buyers, or in furnishing derivatives trade margin in the morning or paying for spot trades by institutions in the event of mismatches.

According to two senior bankers, the Reserve Bank of India (RBI) recently indicated to four prominent private sector banks that such intra-day credits must be supported by a minimum margin of 50% in the form of fixed deposits and marketable assets. As an example, a broker drawing a 500 crore intra-day fund must provide collateral worth at least 250 crore to the lending bank.