Brokerages have welcomed the National Stock Exchange of India’s latest circular that said stock brokers are not permitted to distribute or offer banking loan products — such as home loans, vehicle loans, personal loans, education loans or loans against securities, even if they are registered as research analysts.
The clarification from the NSE came after NSE found that some trading members who are also registered research analysts were distributing banking loan products.
According to Nithin Kamath, Founder and CEO, Zerodha,”All said, this is a good first step; hope to see more in this direction.”
NSE circular has said trading members must strictly follow its June 16, 2025, framework. “Brokers may engage only in lending products expressly permitted by SEBI, including margin trading facility (MTF) and T+1+5 funding, and no other loan products,” the exchange said adding that “it is reiterated that Stock Brokers are not permitted to engage (as distributors) in any lending products (such as Home Loan, Vehicle Loan, Personal Loan, Education Loan, LAS etc) other than those specifically permitted by SEBI from time to time”.
Gaurav Seth, MD & CEO, 5paisa Capital, said that NSE’s recent circular barring distribution of third-party lending products by trading members is a good step. “First, it keeps brokers focused on offering SEBI-regulated products only, and second, it reduces the risk of potentially unnecessary leverage entering the markets,” he said.
The exchange said, “It has been observed that the trading members, who are also registered as research analysts, are carrying out distribution of Banking Products related to various types of loans”.
It may be recalled that Securities and Exchange Board of India in July 2025 allowed research analyst to distribute non-SEBI products (such as banking products) only at a family or group level, with grievances outside SEBI’s purview.
In a X-blog post, Kamath said despite the circular, brokers’ parent companies are allowed to create a “super-app” where broking and lending happens side-by-side. “This is permissible today because there are no restrictions on the parent entity.”
The core concern is that any type of lending or inducement to borrow on a trading platform could lead to borrowed money flowing back into the markets. “And unsecured lending is probably the worst; the risk taken can go up exponentially. People can end up trading with leverage they don’t fully understand or shouldn’t be taking in the first place,” he said in the blog.