New Delhi, Feb. 26 -- MUMBAI: A recent move by the Reserve Bank of India to tighten bank lending to proprietary (prop) traders for speculative trading could unintentionally favour foreign trading firms, as global bank-backed competitive funding that they can access is unavailable to domestic prop traders.

From 1 April, bank guarantees issued to proprietary traders must be fully secured, requiring at least 50% cash collateral. Earlier, traders could back a bank guarantee with a small cash or cash-equivalent margin along with personal or corporate guarantees.

However, market participants say that in the amended regime, some banks may accept stand-by letters of credit (SBLCs) issued by global banks on behalf of foreign firms as non-cash co...